Exam_1_A_Answers - cell phone producers. For example, since...

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Exam 1_A Answers Answer Section MULTIPLE CHOICE 1. ANS: C 2. ANS: C 3. ANS: A 4. ANS: B 5. ANS: C 6. ANS: B 7. ANS: B 8. ANS: A 9. ANS: C 10. ANS: B 11. ANS: D 12. ANS: D 13. ANS: D 14. ANS: B or C 15. ANS: B 21. (a) Price elasticity of demand = 1.8 (b) Since price elasticity of demand is greater than 1, we know that the percentage change in Qd will be greater than the percentage change in price. Therefore, the loss in total revenue due to lower prices will be more than offset by the larger gain in the percentage increase in Qd. Theory suggests that Apple should decrease price. (c) Change in total revenue = $800,000 (d) There are many close substitutes for an iphone due to the number of different cell phone providers and
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Unformatted text preview: cell phone producers. For example, since iphones may only use AT&T as the provider, there may be other providers who have better features that make other cell phones viable substitutes. (e) The iphone is a luxury good due to its high price and social status value. 22. (a) Demand increase; Pe increase and Qe increase. (b) Supply decrease; Pe increase and Qe decrease (c) Domestic P decreases, domestic Qd increases, domestic Qs decreases (d) Supply increase, Pe decrease, Qe increase (e) Demand increases & supply decreases, Price will increase, but change in Q is ambiguous...
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This note was uploaded on 09/26/2008 for the course BEC 211 taught by Professor Rivera during the Spring '08 term at University of Illinois at Urbana–Champaign.

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