Managerial Economics Applications Strategy
and Tactics 12th Edition by McGuigan solutions manual and test bank
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Chapter
3—Demand Analysis
MULTIPLE
CHOICE
1. Suppose
we estimate that the demand elasticity for fine leather jackets is ‑.7 at their
current prices. Then we know that:
a. a
1% increase in price reduces quantity sold by .7%.
b. no
one wants to buy leather jackets.
c. demand
for leather jackets is elastic.
d. a
cut in the prices will increase total revenue.
e. leather
jackets are luxury items.
ANS: A PTS: 1
2. If demand were inelastic, then we should
immediately:
a. cut the price.
b. keep the price where it is.
c.
go to the Nobel Prize Committee to show
we were the first to find an upward sloping demand curve.
d. stop selling it since it is inelastic.
e. raise the price.
ANS:
E PTS : 1
3. In this problem, demonstrate your knowledge
of percentage rates of change of an entire demand function (Hint:
%DQ = EP•%DP + EY•%DY). You have found that the price elasticity of
motor control devices at Allen-Bradley Corporation is -2, and that the income
elasticity is a +1.5. You have been
asked to predict sales of these devices for one year into the future. Economists from the Conference Board predict
that income will be rising 3% over the next year, and AB’s management is planning
to raise prices 2%. You expect that the
number of AB motor control devices sold in one year will:
a.
fall
.5%.
b.
not
change.
c.
rise
1%r.
d.
rise
2%.
e.
rise
.5%.
ANS: E PTS : 1
4 A linear demand for lake front cabins on a
nearby lake is estimated to be: QD
= 900,000 - 2P. What is the point price elasticity for lake front cabins at a price of P =
$300,000? [Hint: Ep = (¶Q/¶P)(P/Q)]
a.
EP
= -3.0
b.
EP
= -2.0
c.
EP
= -1.0
d.
EP
= -0.5
e.
EP
= 0
ANS: B PTS: 1
5. Property taxes are the product of the tax
rate (T) and the assessed value (V). The
total property tax collected in your city (P) is: P = T•V.
If the value of properties rise 4% and if Mayor and City Council reduces
the property the tax rate by 2%, what happens to the total amount of property
tax collected? [hint: the percentage
rate of change of a product is approximately the sum of the percentage rates
of change.}
a. It rises 6 %.
b. It rises 4 %.
c. It rises 3 %.
d. It rises 2 %
e. If falls 2%.
ANS:
D PTS: 1
6. Demand is given by QD = 620 ‑ 10·P
and supply is given by QS = 100 + 3·P. What is the price and quantity when the
market is in equilibrium?
a. The
price will be $30 and the quantity will be 132 units.
b. The price will be $11 and the quantity
will be 122 units.
c. The price will be $40 and the quantity
will be 220 units.
d. The
price will be $35 and the quantity will be 137 units
e. The
price will be $10 and the quantity will be 420 units.
ANS:
C PTS: 1
7. Which of the following would tend to make
demand INELASTIC?
a.
the
amount of time analyzed is quite long
b.
there
are lots of substitutes available
c.
the
product is highly durable
d.
the
proportion of the budget spent on the item is very small
e.
no
one really wants the product at all
ANS: D PTS: 1
8. Which of the
following best represents management's objective(s) in utilizing demand
analysis?
|
a.
|
it provides
insights necessary for the effective manipulation of demand
|
|
b.
|
it helps to measure
the efficiency of the use of company resources
|
|
c.
|
it aids in the
forecasting of sales and revenues
|
|
d.
|
a and b
|
|
e.
|
a and c
|
ANS: E PTS : 1
9. Identify the reasons why the quantity
demanded of a product increases as the price of that product decreases.
|
a.
|
as the price
declines, the real income of the consumer increases
|
|
b.
|
as the price of
product A declines, it makes it more attractive than product B
|
|
c.
|
as the price
declines, the consumer will always demand more on each successive price
reduction
|
|
d.
|
a and b
|
|
e.
|
a and c
|
ANS: D PTS: 1
10. An increase in the quantity demanded could be caused by:
|
a.
|
an increase in the
price of substitute goods
|
|
b.
|
a decrease in the
price of complementary goods
|
|
c.
|
an increase in
consumer income levels
|
|
d.
|
all of the above
|
|
e.
|
none of the above
|
ANS: D PTS: 1
11. Iron ore is an example
of a:
|
a.
|
durable good
|
|
b.
|
producers' good
|
|
c.
|
nondurable good
|
|
d.
|
consumer good
|
|
e.
|
none of the above
|
ANS: B PTS: 1
12. If the cross price elasticity measured between items A and B is
positive, the two products are referred to as:
|
a.
|
complements
|
|
b.
|
substitutes
|
|
c.
|
inelastic as
compared to each other
|
|
d.
|
both b and c
|
|
e.
|
a, b, and c
|
ANS: B PTS: 1
13. When demand is ____ a percentage change in ____ is exactly offset
by the same percentage change in ____ demanded, the net result being a constant
total consumer expenditure.
|
a.
|
elastic; price;
quantity
|
|
b.
|
unit elastic;
price; quantity
|
|
c.
|
inelastic;
quantity; price
|
|
d.
|
inelastic; price;
quantity
|
|
e.
|
none of the above
|
ANS: B PTS: 1
14. Marginal revenue (MR) is ____ when total revenue is maximized.
|
a.
|
greater than one
|
|
b.
|
equal to one
|
|
c.
|
less than zero
|
|
d.
|
equal to zero
|
|
e.
|
equal to minus one
|
ANS: D PTS: 1
15. The factor(s) which cause(s) a movement along the demand curve
include(s):
|
a.
|
increase in level
of advertising
|
|
b.
|
decrease in price
of complementary goods
|
|
c.
|
increase in
consumer disposable income
|
|
d.
|
decrease in price
of the good demanded
|
|
e.
|
all of the above
|
ANS: D PTS: 1
16. An increase in each of the following factors would normally
provide a subsequent increase in quantity demanded, except:
|
a.
|
price of substitute
goods
|
|
b.
|
level of competitor
advertising
|
|
c.
|
consumer income
level
|
|
d.
|
consumer desires
for goods and services
|
|
e.
|
a and b
|
ANS: B PTS: 1
17. Producers' goods are:
|
a.
|
consumers' goods
|
|
b.
|
raw materials
combined to produce consumer goods
|
|
c.
|
durable goods used
by consumers
|
|
d.
|
always more
expensive when used by corporations
|
|
e.
|
none of the above
|
ANS: B PTS: 1
18. The demand for durable goods tends to be more price elastic than
the demand for non-durables.
|
a.
|
true
|
|
b.
|
false
|
ANS: A PTS: 1
19. A price elasticity (ED) of -1.50
indicates that for a ____ increase in price, quantity demanded will ____ by
____.
|
a.
|
one percent;
increase; 1.50 units
|
|
b.
|
one unit; increase;
1.50 units
|
|
c.
|
one percent;
decrease; 1.50 percent
|
|
d.
|
one unit; decrease;
1.50 percent
|
|
e.
|
ten percent;
increase; fifteen percent
|
ANS: C PTS: 1
20. Those goods having a calculated income elasticity that is negative
are called:
|
a.
|
producers' goods
|
|
b.
|
durable goods
|
|
c.
|
inferior goods
|
|
d.
|
nondurable goods
|
|
e.
|
none of the above
|
ANS: C PTS: 1
21. An income elasticity (Ey) of 2.0 indicates that for a
____ increase in income, ____ will increase by ____.
|
a.
|
one percent;
quantity supplied; two units
|
|
b.
|
one unit; quantity
supplied; two units
|
|
c.
|
one percent;
quantity demanded; two percent
|
|
d.
|
one unit; quantity
demanded; two units
|
|
e.
|
ten percent;
quantity supplied; two percent
|
ANS: C PTS: 1
22. When demand elasticity is ____ in absolute value (or ____), an
increase in price will result in a(n) ____ in total revenues.
|
a.
|
less than 1;
elastic; increase
|
|
b.
|
more than 1;
inelastic; decrease
|
|
c.
|
less than 1;
elastic; decrease
|
|
d.
|
less than 1;
inelastic; increase
|
|
e.
|
none of the above
|
ANS: D PTS: 1
23. Empirical estimates of the price elasticity of demand [in Table
3.4] suggest that the demand for household consumption of alcoholic beverages
is:
|
a.
|
highly price
elastic
|
|
b.
|
price inelastic
|
|
c.
|
unitarily elastic
|
|
d.
|
an inferior good
|
|
e.
|
none of the above
|
ANS: B PTS: 1
PROBLEM
- i
- James R. McGuigan
- R. Charles Moyer University of Louisville
- Frederick H.deB. Harris Wake Forest University
- ISBN-10: 1439079234
- ISBN-13: 9781439079232
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