Which of the following statements about monopoly is false? A) A single firm serves the market. B) There are no close substitutes for the monopolist’s output. C) There are usually significant barriers to entry. D) Because there is a single firm serving the entire market, the monopolist can charge whatever price it wants to for […]
Which of the following statements is false? A) Price determination is the key element in any market system. B) Input prices influence a firm’s costs of production. C) Output prices influence a firm’s revenues. D) While managers must understand how output prices are determined, determination of input prices is irrelevant because it is beyond the […]
Assuming we are considering a normal good, the calculated price elasticity of demand is: A) always positive. B) always negative. C) positive if demand is elastic and negative if demand is inelastic. D) positive if demand is inelastic and negative if demand is elastic. ANSWER B
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 […]
