Managerial Economics Applications Strategies And Tactics 13th Edition By McGuigan – Test Bank

Complete Test Bank With Answers

Sample Questions Posted Below

Chapter 5—Business and Economic Forecasting

MULTIPLE CHOICE

1.Time-series forecasting models:

ANS: C PTS: 1

2.The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:

ANS: D PTS: 1

3.The use of quarterly data to develop the forecasting model Y_t = a +bY_t−1 is an example of which forecasting technique?

ANS: B PTS: 1

4.Variations in a time-series forecast can be caused by:

ANS: E PTS: 1

5. The variation in an economic time-series which is caused by major expansions or contractions usually 

of greater than a year in duration is known as:

ANS: B PTS: 1

6.The type of economic indicator that can best be used for business forecasting is the:

ANS: A PTS: 1

7.Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?

ANS: C PTS: 1

8.In the first-order exponential smoothing model, the new forecast is equal to a weighted average of the old forecast and the actual value in the most recent period.

ANS: A PTS: 1

9.Simplified trend models are generally appropriate for predicting the turning points in an economic time series.

ANS: B PTS: 1

10.Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.

ANS: D PTS: 1

11.Seasonal variations can be incorporated into a time-series model in a number of different ways, including:

ANS: D PTS: 1

12. For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?

1. ordinary least squares regression on historical data
2. market experiments, where the price is set differently in two markets
3. consumer surveys, where potential customers hear about the product and are asked their opinions
4. double log functional form regression model
5. all of the above are equally useful in this case

ANS:  C PTS:  1

13. Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?

a.lagging economic indicators.

b.leading economic indicators.

c.coincident economic indicators.

d.wishful thinking

e.none of the above

ANS:  B PTS:  1

14. An example of a time series data set is one for which the:

a.data would be collected for a given firm for several consecutive periods (e.g., months).

b.data would be collected for several different firms at a single point in time.

c.regression analysis comes from data randomly taken from different points in time.

d.data is created from a random number generation program.

d.use of regression analysis would impossible in time series.

ANS:  A PTS: 1

15. Examine the plot of data.  

Sales

  Time

It is likely that the best forecasting method for this plot would be:

a. a two-period moving average

b. a secular trend upward

c. a seasonal pattern that can be modeled using dummy variables or seasonal adjustments

d. a semi-log regression model

e. a cubic functional form

ANS:  C PTS:  1

16. Emma uses a linear model to forecast quarterly same-store sales at the local Garden Center.  The results of her multiple regression is:

Sales = 2,800 + 200•T – 350•D

where T goes from 1 to 16 for each quarter of the year from the first quarter of 2006 (‘06I) through the fourth quarter of 2009 (‘09 IV).  D is a dummy variable which is 1 if sales are in the cold and dreary first quarter, and zero otherwise, because the months of January, February, and March generate few sales at the Garden Center.  Use this model to estimate sales in a store for the first quarter of 2010 in the 17^th month; that is: {2010 I}. Emma’s forecast should be:  

1. a. 5,950
2. b. 6,200
3. c. 6,350
4. d. 6,000
5. e. 5,850

ANS:  E PTS: 1

17. Select the correct statement.

a.Qualitative forecasts give the direction of change.

b.Quantitative forecasts give the exact amount or exact percentage change.

c.Diffusion forecasts use the proportion of the forecasts that are positive to forecast up or down.

d.Surveys are a form of qualitative forecasting.

e.all of the above are correct.

ANS:  E PTS:  1

18. If two alternative economic models are offered, other things equal, we would

a.tend to pick the one with the lowest R^2.

b.select the model that is the most expensive to estimate.

c. pick the model that was the most complex.

d.select the model that gave the most accurate forecasts

e.all of the above

ANS:  D PTS:  1

19. Mr. Geppetto uses exponential smoothing to predict revenue in his wood carving business. He uses a weight of ω = .4 for the naïve forecast and (1-ω) = .6 for the past forecast.  What revenue did he predict for March using the data below?  Select closet answer.

    MONTH   REVENUE        FORECAST

Nov100100

Dec 90100

Jan115—-

Feb 110 —-

MARCH ? ?

a. 106.2

b. 104.7

c. 103.2

d. 102.1

e. 101.7

ANS:  A PTS:  1

20. Suppose a plot of sales data over time appears to follow an S-shape as illustrated below.

Sales                                                

Time

Which of the following is likely that the best forecasting functional form to use for sales data above?

a. A linear trend, Sales = a + b T

b. A quadratic shape in T, using T-squared as another variable, Sales = a + b T + cT².

c. A semi-log form as sales appear to be growing at a constant percentage rate, Ln Sales = a + bT

d. A cubic shape in T, using T-squared and T-cubed as variables, Sales = a + b T + cT² + d T³. 

e. A quadratic shape in T and T-squared as variables, Sales = a + b T + cT² 

ANS:  D PTS: 1

PROBLEM

1.The Accuweather Corporation manufactures barometers and thermometers for weather forecasters. In an attempt to forecast its future needs for mercury, Accuweather’s chief economist estimated average monthly mercury needs as:

          N = 500 + 10X

where N = monthly mercury needs (units) and X = time period in months (January 2008= 0). The following monthly seasonal adjustment factors have been estimated using data from the past five years:

What seasonal adjustment factor should the firm use for November?

ANS:

PTS: 1

2.Milner Brewing Company experienced the following monthly sales (in thousands of barrels) during 2010:

ANS:

PTS: 1