Question

A multiplicative model is:

Select one:

a. a plot of XY data.

b. the relation between one dependent Y variable and one independent X variable.

c. a straight-line relation.

d. a nonlinear relation that involves X variable interactions.

Demand estimation in a controlled environment is possible with:

Select one:

a. market experiments.

b. field studies.

c. regression analysis.

d. consumer surveys.

Demand is always reduced by unanticipated changes in:

Select one:

a. technology that reduces production costs.

b. foreign competition.

c. government regulation that limits profits.

d. energy prices that increase production costs.

Endogenous determinants of demand include:

Select one:

a. competitor prices.

b. the weather.

c. interest rates.

d. firm advertising.

Answer 1

1. The correct answer is: d)

Reason: Consider the example, Y = X1*X2 which is a multiplicative model and infact, a non-linear one.

2. The correct answer is: a)

Reason: In case of market experiments, demand is being estimated in a controlled environment.

3. The correct answer is: b)

Reason: Foreign competition often reduces the demand for domestic becuase they are generally of better quality at cheaper prices.

4. The correct answer is: a)

Reason: Price is an endogenous variable that leads to a change in demand.

Thanks!