11 If the cross price elasticity between two products is -0.5, then 12 Given the
ID: 1164738 • Letter: 1
Question
11 If the cross price elasticity between two products is -0.5, then
12 Given the demand function Q = 50 - 2P, what is the point price elasticity of demand where price is $12.50?
13 A political poll conducted exclusively by calling home (landline) phone numbers in the middle of the day will suffer most from this problem:
14 Suppose that the “goodness of fit” of an equation is nearly perfect. What is the value of the R2statistic in this case?
15 When deciding whether to include an additional independent variable, Adjusted R2 is the appropriate statistic to compare between models.
The next five questions refer to this information.
A concert promoter plans to sell two types of tickets: premium seats, and general admission. The venue accommodates 300 people. Demand for the two types of tickets is estimated to be:
Premium: Pprem = 400 – 0.5Qprem
General admission: Pgen = 300 – 0.5Qgen
Her objective is to maximize profit, which is the same as maximizing revenue in this case (assume the marginal cost of both types of ticket is zero).
16 What condition should she use to maximize total revenue?
17 What is the constraint she must use?
18 What price should she charge for premium seating tickets to maximize total revenue?
19 What price should she charge for general admission tickets?
20 What degree of price discrimination is she using?
The five questions that follow refer to these regression results.
These regression results estimate game attendance, where AvgPrice is the team’s average ticket price, WinPct is the team’s winning percentage so far this season, Sunday indicates the game is played on a Sunday, and Week is week of the season.
21 Which of the following functions corresponds to the regression results above?
22 18% of variation in game attendance is not explained by this model.
23 These regression results are compatible with the Law of Demand.
24 Attendance is highest for Sunday games, other things held constant.
25 Compute estimated attendance for a Friday game, during week 5, if average ticket price is $50, and the team’s winning percentage is 0.5
the products are complements.Explanation / Answer
11. the products are complements.
Complementary goods are those goods which are jointly used to satisfy a particular want of consumer. Increase in price of one good decreases demand of other and vice-versa.
Cross price Ed = % change in quantity demanded of good X / % change in price of good Y
Increase in price of Y causes decrease in demand of X as a result, cross price Ed is negative.
12. At P = 12.50, Q = 50 - 12.50 x 2 = 50 - 25 = 25
dQ/dP = - 2
Ed = P/Q x dQ/dP = 12.50/25 x (-2) = - 1
Answer is d) - 1
14. Very close to +1
When value of R2 is close to + 1 then equation is said to be perfect.
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