The Management of Local Cinema Has Estimated the Monthly Demand

question 66

Multiple Choice

The management of Local Cinema has estimated the monthly demand for tickets to be lnQ = 22,328 - 0.41 lnP + 0.5 lnM - 0.33 lnA + 100 lnP_vcr, where Q = quantity of tickets demanded, P = price per ticket, M = income, A = advertising outlay, and P_vcr = price of a VCR tape rental.It is known that P = $5.50, M = $9,000, A = $900, and P_vcr = $3.00.Based on the information given, which of the following statements is false?

• A)Advertising decreases the demand for movie tickets.
• B)Movies are normal goods.
• C)Movies are complements for VCR tapes.
• D)The advertising elasticity of demand for movie tickets is -0.33.

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Definitions:

Marginal Utility

The additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product or service.

Diminishing

A principle often seen where there is a decrease in the marginal (incremental) output of a production process as the amount of a single factor of production increases while others remain constant.

Donut

A fried dough confectionery or dessert food, usually sweet, and often served with a variety of toppings or fillings.

Total Utility

The total satisfaction received from consuming a particular quantity of a good or service.