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An electric holding company is interested in the possible acquisition of other "electricity retailers" expected to be spun off as the industry is deregulated. As the project point person you have been asked to do some preliminary demand analysis in order to better understand this particular market. The firm hired a consultant to collect average values from each of the fifty US states and to generate a cross-sectional demand model (see regression output table below). The final estimated demand function was provided by the consultant as: Qd = 36,314.7 - 9,937.78 * [Price] + .0889 * [Income] + .021 * [Customers] + 2,197.78 * [Price of Natural Gas] Select the best response among those possible for the next 6 questions: 18. Ignoring the intercept, which of the variables appears to be the most significantly different from zero? a Own price b. Income c. Customers d. Price of Natural Gas 19. Which of the following is most likely represents the upper 95% confidence limit for when sales are estimated from the equation? a. 28,575 (i.e., the sum of the parameter estimates) b. 16,759 (i.e. the parameter standard error estimates sum) c. 11,855 (i.e., the estimated standard error) d. 23,710 (i.e. double the estimated standard error) 20. Estimate the (own) price elasticity of demand. Assume the following: own price is $3, income is $60,000, the market has 1,000,000 potential customers and the price of natural gas is $4. (The following numbers are absolute values.) A .48 b. .57 c. .72 d. 9937 (the slope coefficient) 21. Assuming price is $3, income is $60,000, the market has 1,000,000 potential customers, and the price of natural gas is $4, estimate the cross-price elasticity (of demand). a. .14 b. .35 c. .80 d. .21 22. In general which of the following statements best describes the retail market for electricity? a. The electricity market is not highly price sensitive b. Electricity is a normal good. c. A rise in the price of electricity will increase firm revenues. d. All of the above. 23. In general which of the following statements best describes the retail market for electricity? a. Natural Gas may be a weak substitute for electricity due to the relatively small parameter value. b. Natural Gas may be a strong substitute for electricity due to the relatively large parameter value. c. Natural Gas may be a weak substitute for electricity due to wide confidence range. d. Natural Gas and Electricity are complements
Richard is deciding whether to buy a state lottery ticket. Each ticket costs $1, and the probability of the following winning payoffs is given as follows: Probability Return .5 $0.00 2.5 $1.00 .2 $2.00 -05 $7.50
A British pharmaceutical company spent several years and considerable funds on the development of a treatment for HIV patients. Now, with the protection afforded by patent rights, the company has the potential to reap enormous gains.
Johnson Inc. is notified that local property taxes have raised. Johnson's economist states this will increase our cost of production and shift up our average total cost curve, average variable cost curve.
Hiring more supervisory personnel can reduce the principal-agent problem and decrease costs. can reduce the principal-agent problem but increase costs. will eliminate the principal-agent problem. is contrary to the profit incentive.
You will apply important microeconomics concepts toward the competitive strategies of an organization that operates in an industry of your choice. You will evaluate the differences between market structures and identify a group of competitive stra..
consider a market characterized by the following inverse demand and supply functions px 50 - 4qx and px 10 2qx.
Write the equation for Total Costs and what is TC when profit is maximized - what is Total Revenue when profit is maximized?
Consider another policy where the government could impose a price ceiling p on the monopolist. If the government were interested in maximizing social surplus, what would be the optimal value of p when considered from the point of view of the gover..
A monetarist investigator might say that the sewer flow of 6,000 gallons an hour consisted of an average of 200 gallons in the sewer at any one time with a complete turnover of the water 30 times every hour."
Recall that Carson Company has periodically borrowed funds but contemplates a stock or bond offering so that it can expand by acquiring some other businesses. It has contacted Kelly Investment Company, a securities firm.
1 toys corporation has estimated its demand and cost function as followq 25 - 0.05ptc 780 200qa what will be the
Explain how the price of a product is determined. Analyze how a bartender would know that the price of an exotic drink was too low or too high. Provide adequate conceptual justifications.
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