Managerial Economics & Business Strategy Michael Baye 9th Edition – Test Bank

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Managerial Economics & Business Strategy Michael Baye 9th Edition – Test Bank

Chapter 03

Quantitative Demand Analysis

Multiple Choice Questions

1. Assume that the price elasticity of demand is −2 for a certain firm’s product. If the firm raises price, the firm’s managers can expect total revenue to:
A. decrease.
B. increase.
C. remain constant.
D. either increase or remain constant, depending upon the size of the price increase.

Answer: A

Learning Objective: 03-02

Topic: Own Price Elasticity of Demand

Blooms: Remember

AACSB: Knowledge Application
Difficulty: 01 Easy

2. A price elasticity of zero corresponds to a demand curve that is:
A. horizontal.
B. downward sloping with a slope always equal to 1.
C. vertical.
D. either vertical or horizontal.

Answer: C

Learning Objective: 03-02

Topic: Own Price Elasticity of Demand

Blooms: Understand

AACSB: Knowledge Application
Difficulty: 02 Medium

3. As we move down along a linear demand curve, the price elasticity of demand becomes more:
A. elastic.
B. inelastic.
C. log-linear.
D. variable.

Answer: B

Learning Objective: 03-02

Topic: Own Price Elasticity of Demand

Blooms: Understand

AACSB: Knowledge Application
Difficulty: 02 Medium

4. If the demand for a product is Q _x^d = 10 − ln P_x, then product x is:
A. elastic.
B. inelastic.
C. unitary elastic.
D. Cannot be determined without more information.

Answer: C

Learning Objective: 03-05

Topic: Obtaining Elasticities From Demand Functions

Blooms: Remember

AACSB: Knowledge Application
Difficulty: 01 Easy

5. The demand for good X has been estimated by Q _x^d = 12 − 3P_x + 4P_y. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate your own price elasticity.
A. −0.2
B. −0.3
C. −0.5
D. −0.6

Answer: D

Learning Objective: 03-05

Topic: Obtaining Elasticities From Demand Functions

Blooms: Apply

AACSB: Analytical Thinking
Difficulty: 01 Easy

6. The price elasticity of demand for apples is −1.2. If the price of apples falls by 5 percent, what will happen to the quantity of apples demanded?
A. It will increase by 5 percent.
B. It will fall 4.3 percent.
C. It will increase by 4.2 percent.
D. It will increase by 6 percent.

Answer: D

Learning Objective: 03-01

Topic: Own Price Elasticity of Demand

Blooms: Apply

AACSB: Analytical Thinking
Difficulty: 02 Medium

MAECENAS IACULIS

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ADIPISCING CONVALLIS BULUM

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