Question 1

If a firm that produces carrots operates in a perfectly competitive industry, then

Accepted Answer

A)  the demand for the firm's carrots must be horizontal. 
B)  the demand by individual consumers for carrots must be horizontal. 
C)  the market demand for carrots must be horizontal. 
D)  All of the above must be true. 
A)  the demand for the firm's carrots must be horizontal. 
B)  the demand by individual consumers for carrots must be horizontal. 
C)  the market demand for carrots must be horizontal. 
D)  All of the above must be true. A

Question 2

The price of a firm's product increases from $2.30 to $2.60. As a result, the firm's total revenue decreases from $460,000 to $208,000. The arc price elasticity of demand for the good is equal to

Accepted Answer

A)  -70. 
B)  -7. 
C)  -0.7. 
D)  0. 
A)  -70. 
B)  -7. 
C)  -0.7. 
D)  0. B

Question 3

Consider a scenario where the demand is estimated to be represented by the following equation:
,
$$Q _ { x } = 1000 - 10 P _ { x } + 0.1 I + 10 P _ { y }$$ Where Px is the price of X, I represents the income of the consumer, Py is the price of another related in consumption good, and Qx is the quantity demanded of X.
Based on this demand function, what can be concluded about X?

Accepted Answer

A)  X is a normal good 
B)  X is an inferior good 
C)  The demand for X is not affected by changed in the consumer's income 
D)  Not enough information is provided to determine anything about X 
A)  X is a normal good 
B)  X is an inferior good 
C)  The demand for X is not affected by changed in the consumer's income 
D)  Not enough information is provided to determine anything about X A

Question 4

The price of a good increases from $8 to $10, and as a result the quantity of the good demanded declines from 120 to 80. Calculate the price elasticity of demand using the arc formula and determine whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

The answer of The price of a good increases from...

Question 5

A firm's marginal cost is equal to $8 for all levels of production. If the firm's price elasticity of demand is equal to -2.0, what price should be charged in order to maximize profit?

Accepted Answer

A)  $16 
B)  $12 
C)  $8 
D)  $4 
A)  $16 
B)  $12 
C)  $8 
D)  $4

Question 6

A change in the price of a commodity will cause the demand curve for that commodity to shift.

Accepted Answer

A) True 
 B)False

Question 7

Consider a scenario where the demand is estimated to be represented by the following equation $$Q _ { X } = 60 - 2 P _ { X } - 0.2 I - 10 P _ { Y }$$ :, where Px is the price of X, I represents the income of the consumer, Py is the price of another related in consumption good, and Qx is the quantity demanded of X.
Based on this demand function, what can be concluded about X?

Accepted Answer

A)  X is a normal good 
B)  X is an inferior good 
C)  The demand for X is not affected by changed in the consumer's income 
D)  Not enough information is provided to determine anything about X 
A)  X is a normal good 
B)  X is an inferior good 
C)  The demand for X is not affected by changed in the consumer's income 
D)  Not enough information is provided to determine anything about X

Question 8

Elasticity is a measure that does not depend on the units used to measure price and quantities.

Accepted Answer

A) True 
 B)False

Question 9

Inferior goods are usually the cheap goods.

Accepted Answer

A) True 
 B)False

Question 10

Consider a scenario where the demand is estimated to be represented by the following equation:
,
 $$Q = 3000 - 10 P$$ At what price would the price elasticity value be equal to negative three? Hint: the easiest way to address this question is by using the point elasticity of demand.

Accepted Answer

The answer of Consider a scenario where the demand is...

Question 11

If the price of a good increases, then

Accepted Answer

A)  the demand for complementary goods will increase. 
B)  the demand for the good will increase. 
C)  the demand for substitute goods will increase. 
D)  the demand for the good will decrease. 
A)  the demand for complementary goods will increase. 
B)  the demand for the good will increase. 
C)  the demand for substitute goods will increase. 
D)  the demand for the good will decrease.

Question 12

Consumer demand theory postulates that the quantity demanded of a good also depends on the individual's mood.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not viewed by firms as an advantage of electronic commerce over traditional commerce?

Accepted Answer

A)  Consumers have the ability to easily compare product prices. 
B)  The cost of executing a transaction is much lower. 
C)  Firms have the ability to gather useful information about buyers. 
D)  Firms can reduce their reaction times to changing market conditions and increase their sales reach. 
A)  Consumers have the ability to easily compare product prices. 
B)  The cost of executing a transaction is much lower. 
C)  Firms have the ability to gather useful information about buyers. 
D)  Firms can reduce their reaction times to changing market conditions and increase their sales reach.

Question 14

A firm has kept track of the quantity demanded of its output (Good X) during four time periods. The price of X and the prices of two other goods (Good Y and Good Z) were also recorded for each time period. The information is provided in the table that follows. Use it to calculate the own-price arc elasticity of demand and the two cross-price elasticities of demand. Determine whether Good Y and Good Z are complements or substitutes for Good X.
 $$\begin{array} { l l l l l } 
\text { Time Period } & 1 & 2 & 3 & 4 \
\text { Quantity of } X & 220 & 80 & 250 & 260 \
\text { Price of } X & 15 & 25 & 15 & 25 \
\text { Price of } Y & 10 & 10 & 5 & 10 \
\text { Price of } Z & 2 & 20 & 20 & 30
\end{array}$$

Accepted Answer

The answer of A firm has kept track of the...

Question 15

Which of the following statements about income elasticity is correct?

Accepted Answer

A)  Income elasticity in the short-run is greater than in the long-run. 
B)  Income elasticity in the long-run is greater than in the short-run. 
C)  Income elasticity is the same in the short-run and the long-run. 
D)  There is no clear relationship between the short-run and the long-run. 
A)  Income elasticity in the short-run is greater than in the long-run. 
B)  Income elasticity in the long-run is greater than in the short-run. 
C)  Income elasticity is the same in the short-run and the long-run. 
D)  There is no clear relationship between the short-run and the long-run.

Question 16

The demand function for a product is defined as Q = 24 - 2P. If price is equal to 8, then the price elasticity of demand is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information to determine the answer. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information to determine the answer.

Question 17

If the price elasticity of demand for a firm's output is inelastic, then a decrease in price will reduce the firm's total revenue.

Accepted Answer

A) True 
 B)False

Question 18

The law of demand refers to the relationship between consumer income and the quantity of a commodity demanded per time period.

Accepted Answer

A) True 
 B)False

Question 19

Consider a scenario where the demand is estimated to be represented by the following equation:
,
 $$Q = 3000 - 10 P$$ At what price would the price would the firm facing this demand maximize its total revenue?

Accepted Answer

The answer of Consider a scenario where the demand is...

Question 20

An increase in price of a commodity will generally lead to a decrease in the quantity of the commodity demanded per time period.

Accepted Answer

A) True 
 B)False

If a firm that produces carrots operates in a perfectly competitive industry, then

The price of a firm's product increases from $2.30 to $2.60. As a result, the firm's total revenue decreases from $460,000 to $208,000. The arc price elasticity of demand for the good is equal to

The price of a good increases from $8 to $10, and as a result the quantity of the good demanded declines from 120 to 80. Calculate the price elasticity of demand using the arc formula and determine whether demand is elastic, inelastic, or unit elastic.

A firm's marginal cost is equal to $8 for all levels of production. If the firm's price elasticity of demand is equal to -2.0, what price should be charged in order to maximize profit?

A change in the price of a commodity will cause the demand curve for that commodity to shift.

Elasticity is a measure that does not depend on the units used to measure price and quantities.

Inferior goods are usually the cheap goods.

Consider a scenario where the demand is estimated to be represented by the following equation: , $Q = 3000 - 10 P$ At what price would the price elasticity value be equal to negative three? Hint: the easiest way to address this question is by using the point elasticity of demand.

If the price of a good increases, then

Consumer demand theory postulates that the quantity demanded of a good also depends on the individual's mood.

Which of the following is not viewed by firms as an advantage of electronic commerce over traditional commerce?

Which of the following statements about income elasticity is correct?

The demand function for a product is defined as Q = 24 - 2P. If price is equal to 8, then the price elasticity of demand is

If the price elasticity of demand for a firm's output is inelastic, then a decrease in price will reduce the firm's total revenue.

The law of demand refers to the relationship between consumer income and the quantity of a commodity demanded per time period.

Consider a scenario where the demand is estimated to be represented by the following equation: , $Q = 3000 - 10 P$ At what price would the price would the firm facing this demand maximize its total revenue?

An increase in price of a commodity will generally lead to a decrease in the quantity of the commodity demanded per time period.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

Exam 4: Demand Theory

If a firm that produces carrots operates in a perfectly competitive industry, then

The price of a firm's product increases from $2.30 to $2.60. As a result, the firm's total revenue decreases from $460,000 to $208,000. The arc price elasticity of demand for the good is equal to

The price of a good increases from $8 to $10, and as a result the quantity of the good demanded declines from 120 to 80. Calculate the price elasticity of demand using the arc formula and determine whether demand is elastic, inelastic, or unit elastic.

A firm's marginal cost is equal to $8 for all levels of production. If the firm's price elasticity of demand is equal to -2.0, what price should be charged in order to maximize profit?

A change in the price of a commodity will cause the demand curve for that commodity to shift.

Elasticity is a measure that does not depend on the units used to measure price and quantities.

Inferior goods are usually the cheap goods.

If the price of a good increases, then

Consumer demand theory postulates that the quantity demanded of a good also depends on the individual's mood.

Which of the following is not viewed by firms as an advantage of electronic commerce over traditional commerce?

Which of the following statements about income elasticity is correct?

The demand function for a product is defined as Q = 24 - 2P. If price is equal to 8, then the price elasticity of demand is

If the price elasticity of demand for a firm's output is inelastic, then a decrease in price will reduce the firm's total revenue.

The law of demand refers to the relationship between consumer income and the quantity of a commodity demanded per time period.

Consider a scenario where the demand is estimated to be represented by the following equation: , Q=3000−10PQ = 3000 - 10 PQ=3000−10P At what price would the price would the firm facing this demand maximize its total revenue?

An increase in price of a commodity will generally lead to a decrease in the quantity of the commodity demanded per time period.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

Consider a scenario where the demand is estimated to be represented by the following equation: , $Q = 3000 - 10 P$ At what price would the price would the firm facing this demand maximize its total revenue?