Managerial Economics & Business Strategy Michael Baye 9th Edition- Test Bank
Managerial Economics & Business Strategy Michael Baye 9th Edition- Test BankAssume 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...
Managerial Economics & Business Strategy Michael Baye 9th Edition- Test Bank
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 xd = 10 − lnPx, 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 xd = 12 − 3Px + 4Py. Suppose
that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the
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 own 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 5 percent.
B.It will fall 4.3 percent.
C.It will increase 4.2 percent.
D.It will increase 6 percent.
Answer: D
Learning Objective: 03-01
Topic: Own Price Elasticity of Demand Blooms: Apply
AACSB: Analytical Thinking Difficulty: 02 Medium
7.If apples have an ownprice elasticity of −1.2 we know the demand is:
A.unitary.
B.indeterminate.
C.elastic.
D. inelastic.
Answer: C
Learning Objective: 03-01 Topic: Own Price Elasticity of Demand Blooms: Remember
AACSB: Knowledge Application Difficulty: 01 Easy
8.If quantity demanded for sneakers falls by 10 percent when price increases 25
percent, we know that the absolute value of the own price elasticity of sneakers is:
A. 2.5.
B.0.4.
C. 2.0.
D. 0.27.
Answer: B
Learning Objective: 03-01
Topic: Own Price Elasticity of Demand Blooms: Apply
AACSB: Analytical Thinking Difficulty: 02 Medium
9.The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:
A.elastic.
B.unitary.
C.falling. D.inelastic.
Answer: D
Learning Objective: 03-01
Topic: Own Price Elasticity of Demand Blooms: Remember
AACSB: Knowledge Application Difficulty: 01 Easy
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