4 suppose you are in charge of product pricing and

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1 .   Why is market definition important for economic decision making ?
A ) A firm is interested in knowing its actual and potential competitors .
B ) Government regulators are interested in knowing the effect of mergers and acquisitions on competition and prices in a particular market .
C ) A firm will define its market in order to maximize revenue .
D ) both A and B
E ) both A and C
2 .   Which of the following is a normative statement ?
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3 .   Although the U . S. airline industry has only a relatively small number of sellers , the market is nevertheless highly competitive . The reason is that :
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4 .   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 :
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5 .   You are a division manager at Toyota . If your marketing department estimates that the semiannual demand for Highlander is Q = 60,000 − 0.75 P , what price should you charge in order to maximize revenue from sales of the Highlander ? Use the price elasticity of demand in answering this question . 6 . The Potomac Range Corporation manufactures a line of microwave ovens costing $ 400 each . It s sales have averaged about 5,500 units per month during the past year . In August , Potomac ’s closest competitor , Spring City Stove Works , cut its price for a closely competitive model from $ 580 to $ 500 . Potomac noticed that its sales volume declined to 4,000 units per month after Spring City announced its price cut . A ) What is the arc cross elasticity of demand between Potomac ’s oven and the competitive Spring City model ? B ) Would you say that these two firms are very close competitors ? What other factors could have influenced the observed relationship ? C ) If Potomac knows that the arc price elasticity of demand for its ovens is ﹣ 2.5 , what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut ? 7 . The manager of the Sell - Rite drug store accidentally mismarked a shipment of 20 - pound bags of charcoal at $ 3.15 instead of the regular price of $ 4.25 . In a week , a total of 180 bags of charcoal was sold . The store normally sells an average of 120 bags per week . What is the store ’s arc elasticity of demand for charcoal ? Also make an economic interpretation of the elasticity figure . 8 . From 1970 to 2010 , the real price of a college education increased , and total enrollment increased . Which of the following could have caused this increase in price and enrollment ?
A ) A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education .
B ) A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education .
C ) A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education .
D ) none of the above
8 .   From 1970 to 2010 , the real price of a college education increased , and total enrollment increased . Which of the following could have caused this increase in price and enrollment ?
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Macroeconomics: Private and Public Choice
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Chapter 1 / Exercise 11
Macroeconomics: Private and Public Choice
Gwartney/Stroup/Sobel/Macpherson
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4. 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: A) your pricing policy should not depend on the number of close substitute products. B) there are no close substitutes for your product. C) there are lots of other firms selling closely related products in your market. D) none of the above
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Macroeconomics: Private and Public Choice
The document you are viewing contains questions related to this textbook.
Chapter 1 / Exercise 11
Macroeconomics: Private and Public Choice
Gwartney/Stroup/Sobel/Macpherson
Expert Verified
5. You are a division manager at Toyota. If your marketing department estimates that the semiannual demand for Highlander is Q = 60,000 −0.75P, what price should you charge in order to maximize revenue from sales of the Highlander? Use the price elasticity of demand in answering this question. 6. The Potomac Range Corporation manufactures a line of microwave ovens costing $400 each. Its sales have averaged about 5,500 units per month during the past year. In August, Potomac’s closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $580 to $500. Potomac noticed that its sales volume declined to 4,000 units per month after Spring City announced its price cut. A) What is the arc cross elasticity of demand between Potomac’s oven and the competitive Spring City model? B) Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? C) If Potomac knows that the arc price elasticity of demand for its ovens is 2.5, what price

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