Which of the following statements is correct? A) Arc elasticity of demand is the same as the slope of the demand curve. B) Arc elasticity of demand only applies to a nonlinear demand curve. C) Point elasticity of demand is measured at each point along a demand curve. D) Point elasticity of demand is measured […]
Date: September 10th, 2020
In order for “limit pricing” to be effective, the firm practicing such a strategy must be able to charge a price that is: A) lower than the potential entrant’s ATC but greater than the firm’s own ATC. B) greater than the potential entrant’s ATC but lower than the firm’s own ATC. C) lower than the […]
Date: September 10th, 2020
According to the text there appear to be very limited opportunities for input substitution in the production of pipe organs. Which of the following is the most plausible explanation for this observation? A) Capital costs have made it too expensive to purchase more capital stock. B) It requires a large amount of highly trained labor […]
Date: September 10th, 2020
Assume the firms firms operating in an oligopolistic market experience a relatively small change in marginal costs. According to the kinked demand curve model this would: A) cause a large change in the profit-maximizing level of output. B) leave the equilibrium price unchanged. C) cause the profit-maximizing level of output to change by the same […]
Date: September 10th, 2020
Changes in the macroeconomy, such as an increase in average per person income, can have effects at the microeconomic level, for example, on the profitability of firms in a particular industry. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
As the percentage of the consumer’s income accounted for by a particular good decreases, demand for the good will: A) tend to become more price elastic. B) tend to become more price inelastic. C) tend to become closer to unit elastic. D) tend toward being perfectly elastic. ANSWER B
Date: September 10th, 2020
The evidence on the potential for input substitution in the service sector suggests that: A) there may be more opportunities for input substitution than was previously thought, especially in areas such as health care, financial services, and the even the fine arts. B) the traditional view that the potential for input substitution is extremely limited […]
Date: September 10th, 2020
Which of the following is cited as a problem with the kinked demand curve model? A) It assumes that firms do not attempt to maximize profits. B) It assumes that firms determine the profit-maximizing level of output by equating marginal cost and average variable cost. C) It does not explain how the equilibrium market price […]
Date: September 10th, 2020
If the consumer has a great deal of time to adjust to an increase in the price of gasoline, which of the following is correct? A) Quantity demanded will be relatively sensitive to the change in price. B) The percentage change in quantity demanded will be quite small relative to the percentage change in price. […]
Date: September 10th, 2020
With respect to prices, at the macroeconomic level attention is focused on relative prices, while at the microeconomic level attention is focused on absolute prices. Indicate whether the statement is true or false ANSWER FALSE
Date: September 10th, 2020
