Please answer questions 6-11 using the following information. Build-Right Concre

ID: 1192256 • Letter: P

Question

Please answer questions 6-11 using the following information.

Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:

where Q = yards of cement demanded monthly, P = the price of Build-Right’s cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below:

DEPENDENT VARIABLE:

LNQ

R-SQUARE

F-RATIO

P-VALUE ON F

OBSERVATIONS:

0.678

14.323

0.02311

VARIABLE

PARAMETER

ESTIMATE

STANDARD

ERROR

T-RATIO

P-VALUE

INTERCEPT

4.00

1.50

2.67

0.0122

LNP

–0.800

0.25

–3.20

0.0032

LNM

0.750828

0.1816

4.13

0.0003

LNPR

0.600

0.200

3.00

0.0054

6) Given the above, the estimated demand for cement is

7) Given the above, at the 1 percent level of significance, the number of degrees of freedom for a t-test is _____, and the critical value of the t-statistic is ________. Only parameter estimate(s) ________ is (are) NOT statistically significant at the 1 percent level of significance.

8) Given the above, if tax revenue per capita (M) increases 5%, the estimated quantity of cement demanded will

a. increase by less than 1%.

b. increase more than 1% but less than 5%.

c. increase more than 5% but less than 10%.

d. increase more than 10%.

9) Given the above, the estimated cross-price elasticity of demand for cement relative to the price of asphalt is

a. 0.3

b. 0.6

c. 1.2

d. 3.0

e. none of the above

10) Given the above, if the price of asphalt (PR) decreases 20%, the estimated quantity of cement demanded will:

a. increase 12%

b. increase 6%

c. increase 1.2%

d. decrease 12%.

e. decrease 1.2%.