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BUSN 6120 Class Assessment Part 1 - Managerial Economics and Business Strategy

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Question;BUSN6120Managerial Economics and Business StrategyClass Assessment ? Part 1Please read the following paragraph and answer 6 multiple-choice questions below. For each question, circle the best possible answer from the choices given.Question:Franklin Electric is a holding company interested in the possible acquisition of ?electricity retailers? that are 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. Given the need for expediency and the inability to request time series data from the current sellers in the market, Franklin Electric hired a consultant to collect average values from each of the fifty US states and to generate a demand model using multiple-regression analysis (see attached).The estimated demand function is as follows:Qd = 36315 ? 9937 * Price -.09 * Income +.02 * Customers + 2198 * Price of Natural GasFor the following six questions, select the best response:1. Ignoring the intercept, which of the variables appears to be least significantly different from zero?a. Priceb. Incomec. Customersd. Price of Natural Gas2. Which of the following is most likely the width of 95% confidence interval for any estimate of sales?a. 36, 314b. 11,855c. 23,710 (i.e. 2 * 11,855)e. 24,804 (i.e. 2 * 12,402)3. Assuming price is $3, income is $60,000, the market has 2,000,000 potential customers, and the price of natural gas is $4, estimate the (own) price elasticity (of demand). (The following numbers are absolute values.)a. .48b. .60c. .0001f. 99364. Assuming price is $3, income is $60,000, the market has 2,000,000 potential customers, and the price of natural gas is $4, estimate the cross-price elasticity (of demand).a. -.35b. .18c. .80g. 21975. In general which of the following statements best describes the retail market for electricity?a. The electricity market is highly price sensitiveb. The electricity market is not highly price sensitivec. Electricity is an inferior goodh. There is insufficient information to determine the price sensitivity of this market.6. In general which of the following statements best describes the retail market for electricity?a. Natural Gas is a strong substitute for electricityb. Natural Gas is a weak substitute for electricityc. Natural Gas and Electricity are complementsi. There is insufficient information to determine the relationship between the two.

 

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