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1 | |
Busch Gardens recently announced that it will increase the entrance fees at its theme parks in order to increase park revenues. Busch Gardens must believe that... |
| | A) | the demand for theme park attractions is elastic. |
| | B) | theme park goers are very responsive to price changes. |
| | C) | demand is unitary elastic, and thus the number of visitors will NOT decrease. |
| | D) | the percentage increase in fees will be greater than the percentage decrease in the number of theme park visitors. |
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2 | |
The coefficient of demand elasticity, E, |
| | A) | describes how the firm's total cost changes as price changes. |
| | B) | measures the responsiveness of quantity demanded to changes in the price of the good. |
| | C) | is the percentage change in the price of the good divided by the percentage change in |
| | D) | both b and c |
| | E) | none of the above |
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3 | |
The cross-price elasticity of demand between two goods, X and Y... |
| | A) | is less than zero if X and Y are substitutes. |
| | B) | is the percentage change in the price of Y divided by the percentage change in the quantity of X demanded. |
| | C) | measures the responsiveness of the quantity of X demanded to changes in the price of Y. |
| | D) | both a and c |
| | E) | all of the above |
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4 | |
Marginal revenue... |
| | A) | is the change in total revenue when output increases by one unit. |
| | B) | decreases as output increases. |
| | C) | is always greater than zero. |
| | D) | both a and b |
| | E) | all of the above |
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5 | |
When marginal revenue is positive, |
| | A) | marginal revenue is greater than price. |
| | B) | demand is elastic. |
| | C) | increasing price will increase total revenue. |
| | D) | both b and c |
| | E) | none of the above |
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6 | |
The next four questions refer to the following table showing a demand schedule:
| Price | Quantity Demanded | | $250 | 1500 | | 200 | 2100 | | 150 | 2700 |
If price falls from $250 to $200, what is the elasticity of demand over this range? |
| | A) | -0.67 |
| | B) | -1.0 |
| | C) | -0.08 |
| | D) | -1.5 |
| | E) | -2.0 |
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7 | |
As output increases from 2,100 to 2,700 what is marginal revenue? |
| | A) | $25 |
| | B) | $50 |
| | C) | -$300 |
| | D) | -$25 |
| | E) | $75 |
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8 | |
If price falls from $250 to $200, |
| | A) | arrows representing the price and quantity effects both point down. |
| | B) | an arrow representing the price effect points down and is shorter than an arrow for the quantity effect. |
| | C) | an arrow representing the price effect points down and is longer than an arrow for the quantity effect. |
| | D) | arrows representing the price and quantity effects both point up. |
| | E) | total revenue moves in the same direction as the arrow representing the price effect. |
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9 | |
If price falls from $200 to $150, |
| | A) | arrows representing the price and quantity effects both point down. |
| | B) | an arrow representing the price effect points down and is shorter than an arrow for the quantity effect. |
| | C) | total revenue moves in the same direction as the arrow representing the price effect. total revenue moves in the same direction as the arrow representing the quantity effect. |
| | D) | both b and c |
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10 | |
If the price elasticity of digital video disk (DVD) players is -1.5 and price decreases 20%, what happens to the quantity of DVD players demanded? |
| | A) | quantity increases by 7.5% |
| | B) | quantity increases by 30% |
| | C) | quantity decreases by 13% |
| | D) | quantity decreases by 1.5% |
| | E) | none of the above |
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11 | |
If the own-price elasticity of demand for a good is -0.6 and quantity demanded decreases by 30%, price must have... |
| | A) | decreased by 0.6%. |
| | B) | decreased by 18%. |
| | C) | increased by 20%. |
| | D) | increased by 50%. |
| | E) | none of the above |
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12 | |
The demand for orthodontic treatment (braces) is price inelastic. So it follows that... |
| | A) | the percentage change in price is less than the resulting percentage change in quantity demanded. |
| | B) | if the price of orthodontic treatment increases, total expenditure by consumers on orthodontic treatment will rise. |
| | C) | changes in price do not affect the number of treatments demanded. |
| | D) | both b and c |
| | E) | none of the above |
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13 | |
Which of the following would tend to DECREASE the elasticity of demand for good X? |
| | A) | The cost of producing X declines. |
| | B) | New substitutes for X become available from other firms. |
| | C) | Consumers begin spending a smaller percentage of their income on X. |
| | D) | both b and c |
| | E) | all of the above |
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14 | |
Which of the following would tend to INCREASE the elasticity of demand for good X? |
| | A) | a new discovery allows firms to produce X at a much lower cost. |
| | B) | the percentage of a consumer's income spent on good X increases. |
| | C) | a new product, Y, which can be used in place of X, is introduced. |
| | D) | both b and c |
| | E) | all of the above |
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15 | |
The demand for good X will be more elastic than the demand for good Y when... |
| | A) | good X has more substitutes than good Y. |
| | B) | good X accounts for a smaller percentage of a typical consumer's budget than good Y. |
| | C) | consumers have more time to adjust to a change in the price of good X than they have time to adjust to a change in the price of good Y. |
| | D) | both a and c |
| | E) | all of the above |
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16 | |
Total revenue increased for a firm operating in the elastic range of its demand curve. Which of the following statements is correct? |
| | A) | Quantity demanded must have increased. |
| | B) | The firm must have raised price. |
| | C) | The firm must have lowered price. |
| | D) | both a and c |
| | E) | both b and c |
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17 | |
Refer to the table in Question 6. The equation for demand is |
| | A) | P = 4,500 - 12.5Q |
| | B) | P = 375 - 0.083Q |
| | C) | Q = 750 - 60P. |
| | D) | Q = 4,000 - 12P. |
| | E) | none of the above |
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18 | |
Refer to the table in Question 6. The equation for marginal revenue is |
| | A) | MR = 375 - 0.01Q. |
| | B) | MR = 750 - 0.20Q. |
| | C) | MR = 4,500 - 25Q. |
| | D) | MR = 375 - 0.166Q. |
| | E) | none of the above |
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19 | |
Demand is unitary elastic... |
| | A) | for all prices on a downward-sloping linear demand curve. |
| | B) | at the maximum total revenue of a firm facing a downward-sloping linear demand curve. |
| | C) | at the midpoint of a downward-sloping linear demand curve. |
| | D) | b and c. |
| | E) | none of the above. |
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20 | |
If demand is unitary elastic and the manager increases the price of the good, |
| | A) | there will be no change in demand. |
| | B) | demand for the good will increase and total revenue will increase. |
| | C) | demand for the good will decrease and total revenue will decrease. |
| | D) | demand for the good will increase and total revenue will remain the same as before. |
| | E) | demand for the good will decrease and total revenue will remain the same as before. |
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