Knowledge about the price elasticity of demand is especially useful to managers because it allows them to predict how a change in price would affect a firm’s total revenues. Indicate whether the statement is true or false ANSWER TRUE
A home theater system and an HD television would be considered an example of: A) substitute goods. B) giffen goods. C) inferior goods. D) complementary goods. ANSWER D
Pepsi and Coke have competed in the market for bottled water primarily on the basis of convenience and product differentiation as a means to avoid the negative effects on revenue that result from price competition. Indicate whether the statement is true or false ANSWER TRUE
DSL and broadband internet service would be considered an example of: A) substitute goods. B) giffen goods. C) inferior goods. D) complementary goods. ANSWER A
For the simple case of a production function with two inputs in which the inputs are perfect complements, each isoquant is represented by: A) a vertical line. B) a horizontal line C) a downward sloping straight line. D) a line that forms a right angle. ANSWER D
One could argue that price competition among oligopolistic firms is highly likely to cause the revenues of individual firms to decline, while competition on the basis of product differentiation could cause demand, and total revenues, of individual firms to increase. Indicate whether the statement is true or false ANSWER TRUE
Isoquants are convex to the origin due to: A) the law of diminishing marginal utility. B) the assumption of the diminishing marginal productivity of each input. C) the fact that as less capital is used, its marginal productivity falls. D) the fact that as more labor is used, its marginal productivity rises. ANSWER B
The marginal rate of technical substitution (MRTS) along an isoquant: A) is equal to the price ratio at all points along an isoquant. B) is equal to the ratio of the marginal utilities of the two goods. C) is equal to the ratio of the marginal products of the two inputs. D) remains constant as […]
The intercept term of the linear investment function measures: A) induced investment expenditures. B) autonomous investment expenditures. C) income. D) none of the above. ANSWER B
Observations of consumer behavior suggest that when the price of gasoline rose above $3.50 per gallon, consumer demand for gas became considerably more price elastic. Indicate whether the statement is true or false ANSWER TRUE