All else constant, the choice of whether to use a labor-intensive production process or a capital-intensive one is depends on: A) the absolute prices of capital and labor. B) the relative prices of capital labor. C) the type of market in which the firm operates. D) whether the economy is growing or shrinking. ANSWER […]
For a particular product, a demand elasticity is a quantitative measure that shows: A) the percentage change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product. B) the absolute change in quantity demanded relative to the percentage change in any of the […]
Firms are considered to be price searchers, as opposed to price takers, in all of the following market types except: A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly. ANSWER A
Why is the price elasticity of demand a relative measure? That is, why is elasticity measured in percentage terms rather than in absolute terms? A) So the coefficient of elasticity will not be dependent on the physical units of the good. B) Because absolute measures do not account for the direction of the change in […]
The price elasticity of demand is calculated as: A) the change in price divided by the change in quantity demanded. B) the change in quantity demanded divided by the change in price. C) the percentage change in price divided by the percentage change in quantity demanded. D) the percentage change in quantity demanded divided by […]
Which of the following conditions ensures that excess profits cannot persist in a perfectly competitive market over the long run? A) Large number of firms in the industry. B) Outputs of the firms are perfect substitutes for one another. C) Complete information is available to all market participants. D) Ease of entry into the market. […]
When calculating the price elasticity of demand, which of the following conditions must be satisfied? A) All other factors that influence demand must be held constant. B) Prices of related goods must be held constant but all other factors must be allowed to vary. C) Prices of related goods must be allowed to vary but […]
Assume the demand for a good is price inelastic, i.e., ed < 1 (in absolute value). This means that if price decreases by 50 percent, quantity demanded will: A) increase by more than 50 percent. B) decrease by more than 50 percent. C) increase by less than 50 percent. D) decrease by less than 50 […]
According to the text, the price elasticity of demand for oranges has been estimated to be -0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to: A) increase by 6.2 percent. B) decrease by 6.2 percent. C) increase by 62 percent. D) decrease by 62 percent. […]
The market structure that is characterized by a small number of large firms that have some market power is called: A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly. ANSWER C
