MGE 604 Ch1-3

What statements is false?

While managers must understand how output prices are determined, determination of input prices is irrelevant because it is beyond the manager's control.

Assume that when the price of good Z is increased from $5 to $6, the total revenue earned increases from $600 to $690. Based on this information, we can conclude that over this range, demand for Z is:

inelastic

Information on the price elasticity of demand is particularly important to managerial decision making because:

it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price

What would not cause the supply curve for gasoline to shift?

A change in the incomes of drivers.

What statement is correct?

Point elasticity of demand is measured at each point along a demand curve.

Demand for a good will tend to be more price elastic if it exhibits which of the following characteristics?

The good has many available substitutes.

Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W, where Px = the price of X, Py = the price of good Y, and W = Wage index for workers in industry X. According to this equation:

X and Y are substitutes.

Walmart's decision in 1994 to continue operating stores in specific cities in Mexico when other firms were pulling out would be best classified as:

a microeconomic decision

All else constant, as more firms substitute alternative materials, e.g., plastic, for copper, the market price of copper would be expected to:

decrease.

Assume an analyst has been hired to estimate the price elasticity of demand for Levi's brand blue jeans and for blue jeans in general. All else equal, we would expect the price elasticity of demand to be:

larger for Levi's brand blue jeans than for blue jeans in general.

Firms are considered to be price searchers, as opposed to price takers, in all of the following market types except:

perfect competition

An increase in the number of buyers in the market for LCD TVs would cause the market demand curve for LCD TVs to:

shift right.

The price elasticity of demand is calculated as:

the percentage change in quantity demanded divided by the percentage change in price.