Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank
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1. Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices. Then we know that: a. a 1% increase in price reduces quantity sold by .7%. b. no one wants to buy leather jackets. c. demand for leather jackets is elastic. d. a cut in the prices will increase total revenue. e. leather jackets are luxury items. ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States – BPROG: Analytic TOPICS: The Price Elasticity of Demand KEYWORDS: Knowledge DATE CREATED: 6/21/2016 8:43 AM DATE MODIFIED: 6/21/2016 8:43 AM |
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2. If demand were inelastic, then we should immediately: a. cut the price. b. keep the price where it is. c. go to the Nobel Prize Committee to show we were the first to find an upward-sloping demand curve. D. Stop selling it since it is inelastic. e. raise the price. ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States – BPROG: Analytic TOPICS: The Price Elasticity of Demand KEYWORDS: Comprehension DATE CREATED: 6/21/2016 8:43 AM DATE MODIFIED: 6/21/2016 8:43 AM |
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3. In this problem, demonstrate your knowledge of percentage rates of change of an entire demand function (HINT: %ΔQ = EP•%ΔP + EY•%ΔY). You have found that the price elasticity of motor control devices at Allen-Bradley Corporation is -2, and that the income elasticity is a +1.5. You have been asked to predict sales of these devices for one year into the future. Economists from the Conference Board predict that income will be rising 3% over the next year, and AB’s management is planning to raise prices 2%. You expect that the number of AB motor control devices sold in one year will: a. fall .5%. b. not change. c. rise 1%r. d. rise 2%. e. rise .5%. ANSWER: e POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS: Cross Elasticity of Demand KEYWORDS: BLOOMS: Application DATE CREATED: 6/21/2016 8:43 AM DATE MODIFIED: 6/21/2016 8:43 AM |
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4. A linear demand for lakefront cabins on a nearby lake is estimated to be: QD = 900,000 – 2P. What is the point price elasticity for lakefront cabins at a price of P = $300,000? [HINT: Ep = (∂Q/∂P)(P/Q)] a. EP = -3.0 b. EP = -2.0 c. EP = -1.0 d. EP = -0.5 e. EP = 0 ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS: The Price Elasticity of Demand KEYWORDS: BLOOM’S: Comprehension DATE CREATED: 6/21/2016 8:43 AM DATE MODIFIED: 6/21/2016 8:43 AM |
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