APPENDIX A SOLUTIONS TO PROBLEMSA.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.3If 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.5The 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 pointincrease. A.7(i) When exper= 0, log(salary) = 10.6; therefore,
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