Question 1

If a firm is a perfect competitor, then its marginal revenue is equal to the price of its commodity.

Accepted Answer

A) True 
 B)False  True

Question 2

The arc price elasticity of demand measures the price elasticity at a point on the demand curve.

Accepted Answer

A) True 
 B)False  False

Question 3

It is likely that the cross-price elasticity of demand between two goods produced by different firms in the same industry will be positive and large.

Accepted Answer

A) True 
 B)False  True

Question 4

Most goods are normal.

Accepted Answer

A) True 
 B)False

Question 5

A firm has estimated the following demand function for its product:	
Q = 400 - 5 P + 5 I + 10 A
Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P=$200, I=100, and A=20. Use the point formulas to complete the elasticity calculations indicated below.
(i) Calculate quantity demanded.
(ii) Calculate the price elasticity of demand. Is demand elastic, inelastic, or unit elastic?
(iii) Calculate the income elasticity of demand. Is the good normal or inferior? Is it a necessity or a luxury?
(iv) Calculate the advertising elasticity of demand.

Accepted Answer

(i) Q = 400 - (5)(200) + (5)(1

Question 6

Electronic commerce currently accounts for no more than 10% of total U.S. retail sales.

Accepted Answer

A) True 
 B)False

Question 7

If the independent individual consumer demand curves for a commodity are horizontally summed, the result is the market demand curve for the commodity.

Accepted Answer

A) True 
 B)False

Question 8

A firm has estimated the following demand function for its product:
Q = 8 - 2 P + 0.10 I +A
Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P=$10, I=120, and A=10. Use the point formulas to complete the elasticity calculations indicated below.
(i) Calculate quantity demanded.
(ii) Calculate the price elasticity of demand. Is demand elastic, inelastic, or unit elastic?
(iii) Calculate the income elasticity of demand. Is the good normal or inferior? Is it a necessity or a luxury?
(iv) Calculate the advertising elasticity of demand.

Accepted Answer

(i) Q = 8 -(2)(10) + (0.10)(12

Question 9

If a firm is not a perfect competitor, then its marginal revenue is greater than the price of its commodity.

Accepted Answer

A) True 
 B)False

Question 10

Consumers find it easier to postpone the purchase of a durable good than to postpone the purchase of a nondurable good, so the demand for the durable goods is more unstable than the demand for nondurable goods.

Accepted Answer

A) True 
 B)False

Question 11

A firm has estimated the following demand function for its product:
Q = 100 - 5 P + 5 I + 15 A
Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P=$200, I=150, and A=30. Use the point formulas to complete the elasticity calculations indicated below.
(i) Calculate quantity demanded.
(ii) Calculate the price elasticity for demand. Is demand elastic, inelastic, or unit elastic?
(iii) Calculate the income elasticity of demand. Is the good normal or inferior? Is it a necessity or a luxury?
(iv) Calculate the advertising elasticity of demand.

Accepted Answer

(i) Q = 100 - (5)(200) + (15)(

Question 12

Middle-class life styles are fundamentally different in different countries.

Accepted Answer

A) True 
 B)False

Question 13

If the consumption decisions of individual consumers are not independent, then the horizontal sum of individual consumer demand curves is the market demand curve for the commodity.

Accepted Answer

A) True 
 B)False

Question 14

The quantity demanded of a commodity will decrease if

Accepted Answer

A)  the price of a compliment increases. 
B)  income rises and the good is inferior. 
C)  the price of a substitute decreases. 
D)  the commodity's price increases. 
A)  the price of a compliment increases. 
B)  income rises and the good is inferior. 
C)  the price of a substitute decreases. 
D)  the commodity's price increases.

Question 15

If two goods are very close complements, then the cross-price elasticity of demand between the two goods will be large and negative.

Accepted Answer

A) True 
 B)False

Question 16

Decreased barriers to international trade have increased the differences in consumer preferences between countries.

Accepted Answer

A) True 
 B)False

Question 17

The long-run price elasticity of demand for a commodity is generally greater than the short-run price elasticity of demand for the commodity.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity.

Accepted Answer

A) True 
 B)False

Question 19

A firm has estimated the following demand function for its product:
Q=58 - 2 P +0.10 I + 15 A
Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P=$10, I=120, and A=10. Use the point formulas to complete the elasticity calculations indicated below.
(i) Calculate quantity demanded.
(ii) Calculate the price elasticity of demand. Is demand elastic, inelastic, or unit elastic?
(iii) Calculate the income elasticity of demand. Is the good normal or inferior? Is it a necessity or a luxury?
(iv) Calculate the advertising elasticity of demand.

Accepted Answer

(i) Q = 58-(2)(10) + (0.10)(12

Question 20

The international convergence in tastes has progressed to the point where there are virtually no international differences in consumer preferences.

Accepted Answer

A) True 
 B)False

If a firm is a perfect competitor, then its marginal revenue is equal to the price of its commodity.

The arc price elasticity of demand measures the price elasticity at a point on the demand curve.

It is likely that the cross-price elasticity of demand between two goods produced by different firms in the same industry will be positive and large.

Most goods are normal.

Electronic commerce currently accounts for no more than 10% of total U.S. retail sales.

If the independent individual consumer demand curves for a commodity are horizontally summed, the result is the market demand curve for the commodity.

If a firm is not a perfect competitor, then its marginal revenue is greater than the price of its commodity.

Consumers find it easier to postpone the purchase of a durable good than to postpone the purchase of a nondurable good, so the demand for the durable goods is more unstable than the demand for nondurable goods.

Middle-class life styles are fundamentally different in different countries.

If the consumption decisions of individual consumers are not independent, then the horizontal sum of individual consumer demand curves is the market demand curve for the commodity.

The quantity demanded of a commodity will decrease if

If two goods are very close complements, then the cross-price elasticity of demand between the two goods will be large and negative.

Decreased barriers to international trade have increased the differences in consumer preferences between countries.

The long-run price elasticity of demand for a commodity is generally greater than the short-run price elasticity of demand for the commodity.

An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity.

The international convergence in tastes has progressed to the point where there are virtually no international differences in consumer preferences.

The Nature and Scope of Managerial Economics, 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

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Exam 2: Demand Theory

If a firm is a perfect competitor, then its marginal revenue is equal to the price of its commodity.

The arc price elasticity of demand measures the price elasticity at a point on the demand curve.

It is likely that the cross-price elasticity of demand between two goods produced by different firms in the same industry will be positive and large.

Most goods are normal.

Electronic commerce currently accounts for no more than 10% of total U.S. retail sales.

If the independent individual consumer demand curves for a commodity are horizontally summed, the result is the market demand curve for the commodity.

If a firm is not a perfect competitor, then its marginal revenue is greater than the price of its commodity.

Consumers find it easier to postpone the purchase of a durable good than to postpone the purchase of a nondurable good, so the demand for the durable goods is more unstable than the demand for nondurable goods.

Middle-class life styles are fundamentally different in different countries.

If the consumption decisions of individual consumers are not independent, then the horizontal sum of individual consumer demand curves is the market demand curve for the commodity.

The quantity demanded of a commodity will decrease if

If two goods are very close complements, then the cross-price elasticity of demand between the two goods will be large and negative.

Decreased barriers to international trade have increased the differences in consumer preferences between countries.

The long-run price elasticity of demand for a commodity is generally greater than the short-run price elasticity of demand for the commodity.

An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity.

The international convergence in tastes has progressed to the point where there are virtually no international differences in consumer preferences.

The Nature and Scope of Managerial Economics, 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