Which of the following would be considered an example of a macroeconomic problem? A) Should Microsoft reduce the price of its Windows operating system? B) Should the federal government extend the eligibility period for unemployment benefits? C) Should Mitsubishi eliminate one of its production shifts? D) Should JP Morgan Chase increase the interest rate it […]
Information on the price elasticity of demand is particularly important to managerial decision making because: A) the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it. B) depending on the elasticity coefficient, decision makers will immediately know if a price change will cause […]
Which of the following would be an illustration of a microeconomic issue affecting U.S. auto manufacturers? A) An introduction of new, more fuel efficient models by Japanese competitors. B) A recession in Europe that causes U.S. auto exports to Europe to decline. C) A decline in the demand for new cars in the U.S. due […]
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 […]
