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# ch03 - File Ch03 CHAPTER 3 Demand Analysis and Optimal...

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File: Ch03; CHAPTER 3: Demand Analysis and Optimal Pricing Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 Determinants of Demand 2 Elasticity of Demand 3 Demand Analysis and Optimal Pricing 4 Appendix: Consumer Preferences and Demand MULTIPLE CHOICE 1. The demand equation a) Provides a qualitative list of possible factors affecting demand. b) Contains one or more explanatory variables on the right side of the equation. c) Perfectly predicts the number of units sold. d) Is useful in predicting a firm’s sales but not the sales of the total industry. e) None of the answers above is correct. ANSWER: b SECTION: 1 2. The firm’s demand equation is: Q = 600 – 60P + 2Y. If price increases by \$2 and income increases by \$80, then quantity will a) Increase by 160 units. b) Increase by 40 units. c) Decrease by 120 units. d) Decrease by 40 units. e) There is insufficient information to provide an answer. ANSWER: b SECTION: 1 3. Which of the following will cause the firm’s demand curve to shift? a) A change in the price of the good or service. b) A change in the amount offered for sale. c) A change in the seller’s profit associated with the good or service. d) A change in a non-price variable in the demand function. e) A change in production technology for the good or service. ANSWER: d SECTION: 1 3-1

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