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Review Multiple Q_mid2

Review Multiple Q_mid2 - EC116 REVIEW MULTIPLE QUESTIONS...

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EC116 REVIEW MULTIPLE QUESTIONS FOR MIDTERM II MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.  Refer to the information provided in Figure 5.1 below to answer the questions that follow.  Figure 5.1  1) 
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Refer to  Figure  5.1. The  demand  for tickets  is  
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1) 
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_______  A) 
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 unitarily  elastic.  
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B)   in com
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 perfectly  inelastic.  
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D)   pe rfect   Refer to the information  provided in Figure 5.2 below  to answer the questions that  follow.  Figure 5.2  2) 
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Refer to  Figure  5.2. At  Point C  the price  elasticity  of  demand is  - 1. Along  line  segment  B C of the  demand  curve, the  demand is 
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2)  ____ ___    u n i t a ril el as tic .    in elastic.  
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 elastic.   D) 
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 either elastic or  inelastic, depending on whether price increases or decreases.     3) 
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A firm is  currently  producing  in the  inelastic  portion of  its  demand  curve.  What  course of  action  should  you  recomme nd to this  firm  assuming  it wants to  raise  revenue?  
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3)  ____ ___    C o n t i n u e   p r o d u c i n g   a t   t h e   c u r r e n t   o u t p u t   l e v e l ,  b ec au se  th fir wi ll  m ax im iz its  tot al  re ve nu by  pr od uc in in  th in el as tic  po rti on  of  its  de m an cu rv e.   R ed uc pri ce, because if demand  is inelastic and price is  reduced, total revenue  will increase. 
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Continue selling at the same price, but increase the number of units it produces.   D) 
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