Book: Managerial Economics, 12th Edition
1. Suppose you view gasoline as a normal good, and your income declines by 10 percent. How does this affect your demand curve for gasoline?
A) Shifts rightward B) Shifts leftward C) Does not change
2. Your best friend asks you to rank your all-time favorite films, and you provide the following response: "The Godfather" is better than "Casablanca", "Casablanca" is better than "Key Largo", "Key Largo" is better than "Titanic", and "Titanic" is better than "The Godfather". Which of the basic assumptions about consumer preferences has been violated?
A) More is better B) Completeness C) Transitivity D) None of the basic assumptions is violated here
3. Your company sells new furniture to retail customers, and a consulting study in your market indicates that the elasticity of demand for retail furniture is -2.1. If you plan to raise prices by 10 percent in 2013, what is the expected impact on the total revenue from sales for your firm?
A) Total sales revenue increases B) Total sales revenue declines C) No change in revenue
4. For all US consumers, the price elasticity of demand for beef products purchased at the grocery store is -0.6. If we expect the price of beef to fall by 5.0 percent, what is the expected impact on quantity of retail beef demanded?
A) Quantity declines by 0.3 percent B) Quantity declines by 3.0 percent C) Quantity increases by 0.3 percent D) Quantity increases by 3.0 percent
5. You view paper books and electronic books as imperfect substitutes. If the price of paper books declines, what is the expected change in the demand curve for electronic books?
A) Demand curve shifts rightward B) Demand curve shifts leftward C) No change in the demand curve for electronic books
6. The cross-price elasticity for the quantity of peanut butter consumed with respect to the jelly price is +0.25. What is the relationship between peanut butter and jelly?
A) Complements B) Substitutes C) Independent
7. The demand for bottled water is perfectly inelastic. If the price of bottled water increases, what happens to the total sales revenue for bottled water?
A) Increases B) Declines C) Does not change
8. The US retail demand for aspirin is a downward sloping straight line. If the price of aspirin declines and we move downward along the existing demand curve, what happens to the elasticity of demand?
A) More elastic B) Less elastic C) The elasticity does not change along a straight-line demand curve
9. Your company is the only seller of a hybrid motorcycle in the US market, so you face the downward-sloping demand curve for all US consumers of this product. If you can create an online-buzz with your social media promotional campaign, then you expect the demand to become more inelastic. How will this affect the mark-up (price minus cost) that you can earn?
A) Mark-up increases B) Mark-up decreases C) No impact on the mark-up
10. As your income increases, you increase the amount of fruit juice that you purchase. However, the percentage change in income is smaller than the percentage change in quantity demanded. What type of good is fruit juice?
A) Inferior B) Noncyclical (necessity) normal good C) Cyclical (luxury) normal good D) Independent good
11. Suppose your demand for movie tickets is similar to the case for bus tickets illustrated in the bottom panel of Figure 4.9. In words, the Engle curve is upward sloping at lower income levels and downward sloping at higher income levels. Based on this information, what is the sign for your income elasticity of demand at lower income levels?
A) Positive elasticity B) Negative elasticity C) Zero elasticity
12. Which of the basic properties of consumer preferences indicates that the additional satisfaction generated by consuming one more unit of a good is expected to decline as we consume more and more?
A) More is better B) Completeness C) Transitivity D) Diminishing marginal utility
13. On average, which part of the business cycle in the US lasts longer?
A) Expansion B) Contraction C) Both parts are the same length on average
14. Suppose the price of gasoline increases, but there are no other changes to factors that determine the demand for gasoline (e.g., income, other fuel prices, weather, etc.). How does the demand curve for gasoline change?
A) Shifts rightward B) Shifts leftward C) Move upward along the existing curve D) Move downward along the existing curve
15. One economic consulting agency reports that the US demand for entertainment DVD's is -3.1. What does this value imply about the demand character for this product?
A) Demand is perfectly elastic B) Demand is elastic, but not perfectly elastic C) Demand is perfectly inelastic D) Demand is inelastic, but not perfectly inelastic
This solution gives the correct answers to 15 multiple-choice questions based on the textbook Managerial Economics, 12th Edition. ANSWERS ONLY. NO ANALYSIS.