Question 1

Which of the following is true of full-cost pricing?

Accepted Answer

A) Full-cost pricing uses the marginal cost of a product as its base. 
B) Since fixed costs do not affect optimal price and quantity,full-cost pricing is error-prone. 
C) Firms that use full-cost pricing are producing at the optimum level of output. 
D) Full-cost pricing is based on the markup of price over average variable cost. 
E) Full-cost pricing takes into account the price elasticity of demand for the product. 
A) Full-cost pricing uses the marginal cost of a product as its base. 
B) Since fixed costs do not affect optimal price and quantity,full-cost pricing is error-prone. 
C) Firms that use full-cost pricing are producing at the optimum level of output. 
D) Full-cost pricing is based on the markup of price over average variable cost. 
E) Full-cost pricing takes into account the price elasticity of demand for the product.

Question 2

Other factors constant,a change in _____ will cause a shift in a firm's demand curve.

Accepted Answer

A) the price of the good or service 
B) the quantity of the good offered for sale 
C) the wages paid to labor employed 
D) the general income level of consumers 
E) the technology used in the production of the good or service 
A) the price of the good or service 
B) the quantity of the good offered for sale 
C) the wages paid to labor employed 
D) the general income level of consumers 
E) the technology used in the production of the good or service

Question 3

If the price of a good or service increases,what happens to the firm's demand curve?

Accepted Answer

A) The demand curve shifts inward toward the origin. 
B) The demand curve shifts outward away from the origin. 
C) There is an upward movement along the demand curve. 
D) There is a downward movement along the demand curve. 
E) The slope of the demand curve changes. 
A) The demand curve shifts inward toward the origin. 
B) The demand curve shifts outward away from the origin. 
C) There is an upward movement along the demand curve. 
D) There is a downward movement along the demand curve. 
E) The slope of the demand curve changes.

Question 4

Give examples of how a bookstore would practice the different forms of price discrimination.

Accepted Answer

In order to practice price discriminatio

Question 5

Assume that an increase in the demand for motorcycles led to an increase in the demand for motorcycle helmets.Based on this information,which of the following is likely to be true?

Accepted Answer

A) Motorcycles and motorcycle helmets are considered to be substitute goods. 
B) The increase in demand for helmets will be represented as a movement along the demand curve for motorcycle helmets. 
C) Helmets are considered to be inferior goods. 
D) With an increase in the demand for motorcycles,the demand curve will shift inward toward the origin. 
E) The coefficient associated with the price of helmets will be negative in the demand equation for motorcycles. 
A) Motorcycles and motorcycle helmets are considered to be substitute goods. 
B) The increase in demand for helmets will be represented as a movement along the demand curve for motorcycle helmets. 
C) Helmets are considered to be inferior goods. 
D) With an increase in the demand for motorcycles,the demand curve will shift inward toward the origin. 
E) The coefficient associated with the price of helmets will be negative in the demand equation for motorcycles.

Question 6

A product's point price elasticity has been estimated at -1.5.At the initial price of $20,the quantity demanded was 10 units.If the firm cuts the price to $17.50,quantity demanded and sold is expected to increase by _____.

Accepted Answer

A) 18.75% 
B) 6.67% 
C) 8.75% 
D) 10.33% 
E) 12.5% 
A) 18.75% 
B) 6.67% 
C) 8.75% 
D) 10.33% 
E) 12.5%

Question 7

Suppose that a firm faces the inverse demand curve: P = 20 - Q/40,where Q is quantity demanded and P is price.Now suppose there is a reduction in demand.Provide a new inverse demand equation consistent with this shift.How does the reduction in demand affect the firm's revenue-maximizing output and price?

Accepted Answer

Prior to the reduction in demand,revenue

Question 8

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

Accepted Answer

A) percentage change in quantity demanded to the percentage change in price 
B) percentage change in the price of an input to the percentage change in the price of the good 
C) change in the price of a good to the change in the total revenue 
D) percentage change in price of the good to the percentage change in the consumers' income 
E) percentage change in quantity demanded to the percentage change in the price of a competitor's good 
A) percentage change in quantity demanded to the percentage change in price 
B) percentage change in the price of an input to the percentage change in the price of the good 
C) change in the price of a good to the change in the total revenue 
D) percentage change in price of the good to the percentage change in the consumers' income 
E) percentage change in quantity demanded to the percentage change in the price of a competitor's good

Question 9

Suppose that a firm is selling a good with a marginal cost of $35.Management estimates demand elasticity to be -2.What is the appropriate price to set in order to maximize profit?

Accepted Answer

P = [E_P/(1+E_P)]MC,where P is pri

Which of the following is true of full-cost pricing?

Other factors constant,a change in _____ will cause a shift in a firm's demand curve.

If the price of a good or service increases,what happens to the firm's demand curve?

Give examples of how a bookstore would practice the different forms of price discrimination.

Assume that an increase in the demand for motorcycles led to an increase in the demand for motorcycle helmets.Based on this information,which of the following is likely to be true?

A product's point price elasticity has been estimated at -1.5.At the initial price of $20,the quantity demanded was 10 units.If the firm cuts the price to $17.50,quantity demanded and sold is expected to increase by _____.

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

Suppose that a firm is selling a good with a marginal cost of $35.Management estimates demand elasticity to be -2.What is the appropriate price to set in order to maximize profit?

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Game Theory and Competitive Strategy

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Auctions and Competitive Bidding

Linear Programming

Filters

Exam 3: Demand Analysis and Optimal Pricing

Which of the following is true of full-cost pricing?

Other factors constant,a change in _____ will cause a shift in a firm's demand curve.

If the price of a good or service increases,what happens to the firm's demand curve?

Give examples of how a bookstore would practice the different forms of price discrimination.

Assume that an increase in the demand for motorcycles led to an increase in the demand for motorcycle helmets.Based on this information,which of the following is likely to be true?

A product's point price elasticity has been estimated at -1.5.At the initial price of $20,the quantity demanded was 10 units.If the firm cuts the price to $17.50,quantity demanded and sold is expected to increase by _____.

The price elasticity of demand is defined as the ratio of the _____ other factors held constant.

Suppose that a firm is selling a good with a marginal cost of $35.Management estimates demand elasticity to be -2.What is the appropriate price to set in order to maximize profit?

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Game Theory and Competitive Strategy

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Auctions and Competitive Bidding

Linear Programming

Filters