APPENDIX A
SOLUTIONS TO PROBLEMS
A.1
(i) $566.
(ii) The two middle numbers are 480 and 530; when these are averaged, we obtain 505, or
$505.
(iii) 5.66 and 5.05, respectively.
(iv) The average increases to $586 while the median is unchanged ($505).
A.3
If
price
= 15 and
income
= 200,
quantity
= 120 – 9.8(15) + .03(200) = –21, which is
nonsense.
This shows that linear demand functions generally cannot describe demand over a
wide range of prices and income.
A.5
The majority shareholder is referring to the percentage point increase in the stock return,
while the CEO is referring to the change relative to the initial return of 15%.
To be precise, the
shareholder should specifically refer to a 3 percentage
point
increase.
A.7
(i) When
exper
= 0, log(
salary
) = 10.6; therefore,

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