Question 1

Assume the demand curve for t-shirts is Q = 180 - 15P or P = 12 - .0667 Q. When are total revenues maximized?

Accepted Answer

A)  When the price is $3.00. 
B)  When the price is $6.00. 
C)  When the price is $8.00. 
D)  When the price is $6.66 
A)  When the price is $3.00. 
B)  When the price is $6.00. 
C)  When the price is $8.00. 
D)  When the price is $6.66 B

Question 2

Let Edt = -0.5. This implies that the demand for t is

Accepted Answer

A)  Elastic, because if Pt increases by 1%, Qdt will decrease by 0.5% 
B)  Elastic, because if Pt decreases by 1%, Qdt will decrease by 0.5% 
C)  Inelastic, because if Pt decreases by $1, Qdt will increase by 0.5 units 
D)  Inelastic, because if Pt decreases by 1%, Qdt will increase by 0.5% 
A)  Elastic, because if Pt increases by 1%, Qdt will decrease by 0.5% 
B)  Elastic, because if Pt decreases by 1%, Qdt will decrease by 0.5% 
C)  Inelastic, because if Pt decreases by $1, Qdt will increase by 0.5 units 
D)  Inelastic, because if Pt decreases by 1%, Qdt will increase by 0.5% D

Question 3

Price elasticity is defined as the change in quantity demanded relative to a change in:

Accepted Answer

A)  the price of substitute products. 
B)  consumer income. 
C)  the price of complementary products. 
D)  the price of the product. 
A)  the price of substitute products. 
B)  consumer income. 
C)  the price of complementary products. 
D)  the price of the product. D

Question 4

Fast food is believed to be an inferior good. This means that:

Accepted Answer

A)  the quantity of fast food consumed decreases as income increases. 
B)  the income elasticity of demand for fast food is positive. 
C)  the quantity of fast food consumed will always be high 
D)  fast food is really not quality food 
A)  the quantity of fast food consumed decreases as income increases. 
B)  the income elasticity of demand for fast food is positive. 
C)  the quantity of fast food consumed will always be high 
D)  fast food is really not quality food

Question 5

FarAwayDrive Inc. has recently increased the price of its golf balls from $4.00 to $6.00. In response to this increase in price, sales decreased from 2,200 to 1,800 units. If no other information concerning the demand is available, which of the following is true about the sensitivity of demand (using the ARC or mid-points formula) for FarAwayDrive's golf balls?

Accepted Answer

A)  The ARC-elasticity (midpoints formula) of demand is 2.0. 
B)  The ARC-elasticity (midpoints formula) of demand is ½ or .50. 
C)  The ARC-elasticity (midpoints formula) of demand is 2/3 or .667. 
D)  The ARC-elasticity (midpoints formula) of demand is 4/11 or .364. 
A)  The ARC-elasticity (midpoints formula) of demand is 2.0. 
B)  The ARC-elasticity (midpoints formula) of demand is ½ or .50. 
C)  The ARC-elasticity (midpoints formula) of demand is 2/3 or .667. 
D)  The ARC-elasticity (midpoints formula) of demand is 4/11 or .364.

Question 6

If the demand for movie tickets is elastic, then

Accepted Answer

A) Ed > 1 B) Ed < 1 C) Ed = 1 D) Ed = 0 A) Ed > 1 B) Ed < 1 C) Ed = 1 D) Ed = 0

Question 7

The identification problem in using regression analysis to estimate a demand curve emerges when:

Accepted Answer

A)  factors affecting the demand for the product are highly correlated. 
B)  the demand for the product has not been stable over time. 
C)  the demand for the product has been relatively stable over time. 
D)  the supply of the product has been relatively unstable over time 
A)  factors affecting the demand for the product are highly correlated. 
B)  the demand for the product has not been stable over time. 
C)  the demand for the product has been relatively stable over time. 
D)  the supply of the product has been relatively unstable over time

Question 8

As we move down a linear demand curve, demand becomes

Accepted Answer

A)  More elastic 
B)  More inelastic 
C)  Unitary elastic 
D)  Perfectly elastic 
A)  More elastic 
B)  More inelastic 
C)  Unitary elastic 
D)  Perfectly elastic

Question 9

A demand function depicts how the consumer demand of a product varies with:

Accepted Answer

A)  available income. 
B)  cost of raw materials 
C)  the price of oil 
D)  amount available in the market 
A)  available income. 
B)  cost of raw materials 
C)  the price of oil 
D)  amount available in the market

Question 10

Price elasticity of demand tells us the responsiveness of

Accepted Answer

A)  Quantity demanded, to a $1 change in price 
B)  Quantity demanded, to a 5% change in price 
C)  Price, to a 1% change in quantity demanded 
D)  Quantity demanded, to a 1% change in price 
A)  Quantity demanded, to a $1 change in price 
B)  Quantity demanded, to a 5% change in price 
C)  Price, to a 1% change in quantity demanded 
D)  Quantity demanded, to a 1% change in price

Question 11

Computer equipment is believed to be a normal good. This means that:

Accepted Answer

A)  the quantity of computer equipment consumed decreases as income increases. 
B)  the income elasticity of demand for computer equipment is negative. 
C)  the quantity of computer equipment increases as income increases. 
D)  the quantity of computer equipment increases as income decreases. 
A)  the quantity of computer equipment consumed decreases as income increases. 
B)  the income elasticity of demand for computer equipment is negative. 
C)  the quantity of computer equipment increases as income increases. 
D)  the quantity of computer equipment increases as income decreases.

Question 12

The shape of a perfectly elastic demand curve is

Accepted Answer

A)  Horizontal, Ed = infinity 
B)  Horizontal, Ed = 0 
C)  Horizontal, Ed = -1 
D)  Vertical, Ed = 0 
A)  Horizontal, Ed = infinity 
B)  Horizontal, Ed = 0 
C)  Horizontal, Ed = -1 
D)  Vertical, Ed = 0

Question 13

Sales of shampoo by CleanHair, Inc. have recently decreased from 1,300 to 1,100 units in response to a price decrease from $7 to $5 by its main competitor. Assuming that everything else is being held constant, we can infer that:

Accepted Answer

A)  the cross-price ARC-elasticity (midpoints formula) between the two products is -2. 
B)  the cross-price ARC-elasticity (midpoints formula) between the two products is -½. 
C)  the cross-price ARC-elasticity (midpoints formula) between the two products is ½. 
D)  the cross-price ARC-elasticity (midpoints formula) between the two products is 2. 
A)  the cross-price ARC-elasticity (midpoints formula) between the two products is -2. 
B)  the cross-price ARC-elasticity (midpoints formula) between the two products is -½. 
C)  the cross-price ARC-elasticity (midpoints formula) between the two products is ½. 
D)  the cross-price ARC-elasticity (midpoints formula) between the two products is 2.

Question 14

Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of the following statements is true?

Accepted Answer

A)  Pyrotex will surely increase its profits by decreasing the price of fireworks. 
B)  Pyrotex will surely increase its profits by increasing the price of fireworks. 
C)  Pyrotex cannot increase its profits by changing the price of fireworks. 
D)  Not enough information is provided to determine whether Pyrotex is currently maximizing its profits. 
A)  Pyrotex will surely increase its profits by decreasing the price of fireworks. 
B)  Pyrotex will surely increase its profits by increasing the price of fireworks. 
C)  Pyrotex cannot increase its profits by changing the price of fireworks. 
D)  Not enough information is provided to determine whether Pyrotex is currently maximizing its profits.

Question 15

Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of the following statements is true?

Accepted Answer

A)  Pyrotex will increase its revenues by decreasing the price of fireworks. 
B)  Pyrotex will increase its revenues by increasing the price of fireworks. 
C)  Pyrotex cannot increase its revenues by changing the price of fireworks. 
D)  Not enough information is provided to determine whether or not Pyrotex is currently maximizing its profits. 
A)  Pyrotex will increase its revenues by decreasing the price of fireworks. 
B)  Pyrotex will increase its revenues by increasing the price of fireworks. 
C)  Pyrotex cannot increase its revenues by changing the price of fireworks. 
D)  Not enough information is provided to determine whether or not Pyrotex is currently maximizing its profits.

Question 16

Assume D1 represents the current demand curve for skis. Which of the following would be likely to cause D1 to shift to D2?

Accepted Answer

A)  An increase in the price of snowboards. 
B)  An increase in the price of ski boots and clothing. 
C)  A decrease in the price of skis. 
D)  An increase in the price of skis. 
A)  An increase in the price of snowboards. 
B)  An increase in the price of ski boots and clothing. 
C)  A decrease in the price of skis. 
D)  An increase in the price of skis.

Question 17

Which of the demand curves depicted below has constant price elasticity?

Accepted Answer

A)  All of them. 
B)  None of them. 
C)  (1) and (3). 
D)  (2) and (3). 
A)  All of them. 
B)  None of them. 
C)  (1) and (3). 
D)  (2) and (3).

Question 18

The shape of a perfectly inelastic demand curve is

Accepted Answer

A)  Horizontal, Ed =   
B)  Horizontal, Ed = 0 
C)  Horizontal, Ed = -1 
D)  Vertical, Ed = 0 
A)  Horizontal, Ed =   
B)  Horizontal, Ed = 0 
C)  Horizontal, Ed = -1 
D)  Vertical, Ed = 0

Question 19

If the demand for product A displays high and positive cross-price elasticity with respect to the price of product B, then:

Accepted Answer

A)  the demand for product A is likely to have a low price elasticity. 
B)  products A and B are substitutes. 
C)  products A and B are complements 
D)  the demand for product B is likely to have a low price elasticity. 
A)  the demand for product A is likely to have a low price elasticity. 
B)  products A and B are substitutes. 
C)  products A and B are complements 
D)  the demand for product B is likely to have a low price elasticity.

Question 20

The long-run price elasticity of demand for a product is generally _________ the short-run elasticity for the same product.

Accepted Answer

A)  lower than 
B)  equal to 
C)  higher than 
D)  not comparable to 
A)  lower than 
B)  equal to 
C)  higher than 
D)  not comparable to

Exam 4: Demand

Assume the demand curve for t-shirts is Q = 180 - 15P or P = 12 - .0667 Q. When are total revenues maximized?

Let Edt = -0.5. This implies that the demand for t is

Price elasticity is defined as the change in quantity demanded relative to a change in:

Fast food is believed to be an inferior good. This means that:

If the demand for movie tickets is elastic, then

The identification problem in using regression analysis to estimate a demand curve emerges when:

As we move down a linear demand curve, demand becomes

A demand function depicts how the consumer demand of a product varies with:

Price elasticity of demand tells us the responsiveness of

Computer equipment is believed to be a normal good. This means that:

The shape of a perfectly elastic demand curve is

Sales of shampoo by CleanHair, Inc. have recently decreased from 1,300 to 1,100 units in response to a price decrease from $7 to $5 by its main competitor. Assuming that everything else is being held constant, we can infer that:

Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of the following statements is true?

Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of the following statements is true?

Assume D1 represents the current demand curve for skis. Which of the following would be likely to cause D1 to shift to D2?

Which of the demand curves depicted below has constant price elasticity?

The shape of a perfectly inelastic demand curve is

If the demand for product A displays high and positive cross-price elasticity with respect to the price of product B, then:

The long-run price elasticity of demand for a product is generally _________ the short-run elasticity for the same product.

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters

Let Ed_t = -0.5. This implies that the demand for t is

Assume D₁ represents the current demand curve for skis. Which of the following would be likely to cause D₁ to shift to D₂?