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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Demand Analysis and Optimal Pricing 4. If the price of a good or service increases, a) The demand curve shifts inward. b) The demand curve shifts outward. c) There is a movement along the demand curve. d) There is a movement along and a shift in the demand curve. e) The demand curve changes slope but does not shift. ANSWER: c SECTION: 1 5. If the price of MP3 players decreases, a) The price per downloaded song will also decrease. b) The demand for downloading songs will increase. c) The demand for downloading songs will be unaffected. d) Answers a and b are both correct. e) None of the answers above is correct. ANSWER: b SECTION: 1 6. Of the following goods and services, which is most likely to be inferior? a) Gasoline b) Air travel c) Ten-year-old used cars d) Wine e) DVDs ANSWER: c SECTION: 1 7. The price elasticity of demand is defined as the a) Ratio of the percentage change in quantity to the percentage change in price. b) Ratio of the change in quantity to the change in price. c) Absolute change in quantity resulting from a price change. d) Change in the slope of the demand curve when price changes. e) Ratio of the percentage change in price to the percentage change in quantity. ANSWER: a SECTION: 1 8. Which of the following is likely to affect demand elasticity? a)
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This note was uploaded on 03/11/2012 for the course ECON 333 taught by Professor Barkley during the Fall '08 term at CSU Fullerton.

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ch03 - File: Ch03; CHAPTER 3: Demand Analysis and Optimal...

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