Question 1

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when Q is equal to 5, average revenue and marginal revenue are equal to and .

Accepted Answer

A)  $75; $75. 
B)  $85; $85. 
C)  $75; $60. 
D)  $60; $60. 
A)  $75; $75. 
B)  $85; $85. 
C)  $75; $60. 
D)  $60; $60.

Question 2

Assume a consumer purchases two goods: X and Y. All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

Accepted Answer

A)  Senior citizens tend to have elastic demands for restaurant meals. 
B)  Senior citizens tend to have inelastic demands for restaurant meals. 
C)  Senior citizens are not very sensitive to changes in price. 
D)  Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination. 
A)  Senior citizens tend to have elastic demands for restaurant meals. 
B)  Senior citizens tend to have inelastic demands for restaurant meals. 
C)  Senior citizens are not very sensitive to changes in price. 
D)  Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination.

Question 4

In the case of a linear demand function, the marginal revenue function is twice as steep as the demand function.

Accepted Answer

A) True 
 B)False

Question 5

We would expect the cross price elasticity of demand between digital cameras and film cameras to be positive.

Accepted Answer

A) True 
 B)False

Question 6

Marginal revenue equals 0 when:

Accepted Answer

A)  total revenue is increasing. 
B)  total revenue is at its maximum. 
C)  total revenue is decreasing. 
D)  none of the above; marginal revenue is always positive. 
A)  total revenue is increasing. 
B)  total revenue is at its maximum. 
C)  total revenue is decreasing. 
D)  none of the above; marginal revenue is always positive.

Question 7

When a demand curve is perfectly elastic:

Accepted Answer

A)  marginal revenue = average revenue = price. 
B)  marginal revenue > average revenue = price. 
C)  marginal revenue  average revenue > price. 
A)  marginal revenue = average revenue = price. 
B)  marginal revenue > average revenue = price. 
C)  marginal revenue  average revenue > price.

Question 8

A demand elasticity coefficient is a measure of the sensitivity of quantity demanded to a change in one of the determinants of demand.

Accepted Answer

A) True 
 B)False

Question 9

Referring to the previous question, as a result of the consumer's adjustment to the change in the price of Y, assuming Y is a normal good and X and Y are complements, it is reasonable to expect that the amount of Y consumed will , and the amount of X consumed will :

Accepted Answer

A)  increase; decrease 
B)  decrease; decrease 
C)  increase; increase 
D)  cannot be determined; cannot be determined 
A)  increase; decrease 
B)  decrease; decrease 
C)  increase; increase 
D)  cannot be determined; cannot be determined

Question 10

As the amount of time a consumer has to adjust to a change in price increases, so does the price elasticity of demand for a good.

Accepted Answer

A) True 
 B)False

Question 11

The total revenue from the sale of a good or service is calculated by multiplying the price paid by the number of units sold.

Accepted Answer

A) True 
 B)False

Question 12

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when P = 20, the point price elasticity of demand is equal to approximately):

Accepted Answer

A)  -0.22. 
B)  -0.29. 
C)  -0.67. 
D)  -4.5. 
A)  -0.22. 
B)  -0.29. 
C)  -0.67. 
D)  -4.5.

Question 13

For a normal good, the income elasticity of demand is:

Accepted Answer

A)  positive or negative depending on the share of income accounted for by the good. 
B)  always equal to 1. 
C)  positive if income increases and negative when income declines. 
D)  always positive. 
A)  positive or negative depending on the share of income accounted for by the good. 
B)  always equal to 1. 
C)  positive if income increases and negative when income declines. 
D)  always positive.

Question 14

The available data strongly suggest that, as the "needs" argument would suggest, the demand for health care is virtually perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 15

The "marginal rate of substitution" between two goods is measured by:

Accepted Answer

A)  the ratio of the market prices of the two goods. 
B)  the number of units of a good consumed divided by the market price of the other good. 
C)  the number of units of one good a consumer would give up to consume one more unit of another good, while holding total utility constant. 
D)  the consumer's budget constraint divided by the price of each good. 
A)  the ratio of the market prices of the two goods. 
B)  the number of units of a good consumed divided by the market price of the other good. 
C)  the number of units of one good a consumer would give up to consume one more unit of another good, while holding total utility constant. 
D)  the consumer's budget constraint divided by the price of each good.

Question 16

According to the text, the price elasticity of demand for oranges has been estimated to be -0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

Accepted Answer

A)  increase by 6.2 percent. 
B)  decrease by 6.2 percent. 
C)  increase by 62 percent. 
D)  decrease by 62 percent. 
A)  increase by 6.2 percent. 
B)  decrease by 6.2 percent. 
C)  increase by 62 percent. 
D)  decrease by 62 percent.

Question 17

Assume that when the price of good X is $7, quantity demanded is 25. When price is increased to $9, quantity demanded falls to 20. Based on this information, over the range in question demand is elastic.

Accepted Answer

A) True 
 B)False

Question 18

As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will:

Accepted Answer

A)  tend to become more price elastic. 
B)  tend to become more price inelastic. 
C)  tend to become closer to unit elastic. 
D)  tend toward being perfectly elastic. 
A)  tend to become more price elastic. 
B)  tend to become more price inelastic. 
C)  tend to become closer to unit elastic. 
D)  tend toward being perfectly elastic.

Question 19

The price elasticity of demand is calculated as:

Accepted Answer

A)  the change in price divided by the change in quantity demanded. 
B)  the change in quantity demanded divided by the change in price. 
C)  the percentage change in price divided by the percentage change in quantity demanded. 
D)  the percentage change in quantity demanded divided by the percentage change in price. 
A)  the change in price divided by the change in quantity demanded. 
B)  the change in quantity demanded divided by the change in price. 
C)  the percentage change in price divided by the percentage change in quantity demanded. 
D)  the percentage change in quantity demanded divided by the percentage change in price.

Question 20

Assume the demand function for a particular good can be written as P = 150 - 6Q. When P = 12, the point elasticity of demand equals 2.08.

Accepted Answer

A) True 
 B)False

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when Q is equal to 5, average revenue and marginal revenue are equal to and .

Assume a consumer purchases two goods: X and Y. All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease.

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

In the case of a linear demand function, the marginal revenue function is twice as steep as the demand function.

We would expect the cross price elasticity of demand between digital cameras and film cameras to be positive.

Marginal revenue equals 0 when:

When a demand curve is perfectly elastic:

A demand elasticity coefficient is a measure of the sensitivity of quantity demanded to a change in one of the determinants of demand.

Referring to the previous question, as a result of the consumer's adjustment to the change in the price of Y, assuming Y is a normal good and X and Y are complements, it is reasonable to expect that the amount of Y consumed will , and the amount of X consumed will :

As the amount of time a consumer has to adjust to a change in price increases, so does the price elasticity of demand for a good.

The total revenue from the sale of a good or service is calculated by multiplying the price paid by the number of units sold.

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when P = 20, the point price elasticity of demand is equal to approximately):

For a normal good, the income elasticity of demand is:

The available data strongly suggest that, as the "needs" argument would suggest, the demand for health care is virtually perfectly inelastic.

The "marginal rate of substitution" between two goods is measured by:

According to the text, the price elasticity of demand for oranges has been estimated to be -0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

Assume that when the price of good X is $7, quantity demanded is 25. When price is increased to $9, quantity demanded falls to 20. Based on this information, over the range in question demand is elastic.

As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will:

The price elasticity of demand is calculated as:

Assume the demand function for a particular good can be written as P = 150 - 6Q. When P = 12, the point elasticity of demand equals 2.08.

Managers and Economics

Demand, Supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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Exam 3: Demand Elasticities

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when Q is equal to 5, average revenue and marginal revenue are equal to and .

Assume a consumer purchases two goods: X and Y. All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease.

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

In the case of a linear demand function, the marginal revenue function is twice as steep as the demand function.

We would expect the cross price elasticity of demand between digital cameras and film cameras to be positive.

Marginal revenue equals 0 when:

When a demand curve is perfectly elastic:

A demand elasticity coefficient is a measure of the sensitivity of quantity demanded to a change in one of the determinants of demand.

Referring to the previous question, as a result of the consumer's adjustment to the change in the price of Y, assuming Y is a normal good and X and Y are complements, it is reasonable to expect that the amount of Y consumed will , and the amount of X consumed will :

As the amount of time a consumer has to adjust to a change in price increases, so does the price elasticity of demand for a good.

The total revenue from the sale of a good or service is calculated by multiplying the price paid by the number of units sold.

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when P = 20, the point price elasticity of demand is equal to approximately):

For a normal good, the income elasticity of demand is:

The available data strongly suggest that, as the "needs" argument would suggest, the demand for health care is virtually perfectly inelastic.

The "marginal rate of substitution" between two goods is measured by:

According to the text, the price elasticity of demand for oranges has been estimated to be -0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

Assume that when the price of good X is $7, quantity demanded is 25. When price is increased to $9, quantity demanded falls to 20. Based on this information, over the range in question demand is elastic.

As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will:

The price elasticity of demand is calculated as:

Assume the demand function for a particular good can be written as P = 150 - 6Q. When P = 12, the point elasticity of demand equals 2.08.

Managers and Economics

Demand, Supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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