PROBLEM SET 1

# PROBLEM SET 1 - PROBLEM SET 1 ECON 303 Due Wednesday...

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1 PROBLEM SET 1 ECON 303 Due Wednesday September 8 before class (14:00 p.m. THH 212) NAME ____________________________________ MULTIPLE CHOICE . Choose the one alternative that best answers the question. 1) Suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. You will have greater ability to independently set prices for your product if: 1)_____ A) there are no close substitutes for your product. B) there are lots of other firms selling closely related products in your market. C) Your pricing policy should not depend on the number of close substitute products. D) none of the above 2) Which of the following statement is FALSE? 2)_____ A) A market may be composed of only one buyer and one seller. B) Perfectly competitive markets are composed of many buyers and sellers. C) Some markets may have only a few sellers but exhibit the properties of perfect competition. D) All of the above statements are correct. 3) The cross price elasticity between a pair of complementary goods will be 3)_____ A) positive. B) positive or zero depending upon the strength of the relationship. C) zero. D) negative. 4) A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for c, we can use observed values for Q and I and then set the estimated income elasticity of demand equal to: 4)_____ A) c(Q/I) B) Q/(cI) C) c(I/Q) D) - b(I/Q) 5) An upward sloping indifference curve defined over two goods violates which of the following assumptions from the theory of consumer behavior? 5)_____

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PROBLEM SET 1 - PROBLEM SET 1 ECON 303 Due Wednesday...

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