chp 5 test bank - CHAPTER 5DEMAND ANALYSIS AND ESTIMATION...

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Unformatted text preview: CHAPTER 5DEMAND ANALYSIS AND ESTIMATION MULTIPLE CHOICE 1. Point elasticity measures elasticity: a. over a given range of a function. b. at a spot on a function. c. over a given range along a function. d. before non-price effects. ANS: B 2. Arc elasticity is measured: a. over a given range of a function. b. at a spot on a function. c. over a given range along a function. d. before non-price effects. ANS: C 3. With elastic demand, a price increase will: a. decrease marginal revenue. b. decrease total revenue. c. increase total revenue. d. decrease marginal revenue and total revenue. ANS: B 4. With unitary elasticity of demand, a price increase will: a. be associated with zero marginal revenue. b. decrease total revenue. c. increase total revenue. d. decrease marginal and total revenue. ANS: A 5. With inelastic demand, a price increase produces: a. a less than proportionate decline in quantity demanded. b. lower total revenue. c. lower marginal revenue. d. lower marginal and total revenue. ANS: A 6. With inelastic demand, a price increase produces: a. higher profits. b. lower profits. c. lower marginal revenue. d. lower total revenue. ANS: A 7. A direct relation exists between the price of one product and the demand for: a. complements. b. substitutes. c. normal goods. d. inferior goods. ANS: B 8. The demand for a product tends to be inelastic if: a. it is expensive. b. a small proportion of consumer's income is spent on the good. c. consumers are quick to respond to price changes. d. it has many substitutes. ANS: B 9. Two products are complements if the: a. cross-price elasticity of demand is less than zero. b. cross-price elasticity of demand equals zero. c. cross-price elasticity of demand is greater than zero. d. price elasticity of demand for each good is greater than zero. ANS: A 10. If the income elasticity of demand for a good is greater than one, the good is: a. a noncyclical normal good. b. a cyclical normal good. c. neither a normal nor an inferior good. d. an inferior good. ANS: B 11. A product that enjoys rapidly growing demand over time is likely to be: a. a noncyclical normal good. b. a cyclical normal good. c. neither a normal nor an inferior good. d. an inferior good. ANS: B 12. The point advertising elasticity reveals the: a. percentage change in demand following a change in advertising. b. percentage change in the quantity demanded following a change in advertising. c. percentage change in advertising following a change in the quantity demanded. d. percentage change in advertising following a change in demand. ANS: A 13. When the product demand curve is Q = 140 - 10P, and price is decreased from P 1 = $10 to P 2 = $9, the arc price elasticity of demand is: a.-0.1 b.-3 c.-4 d.-10 ANS: B 14. If the point price elasticity of demand equals -2 and the marginal cost per unit is $5, the optimal price is: a. $5 b. $10 c. $2 d. impossible to determine without further information....
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chp 5 test bank - CHAPTER 5DEMAND ANALYSIS AND ESTIMATION...

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