# Market demand

A market demand curve is likely to shift to the right when:

Select one:

A. average income falls

B. prices fall

C. prices rise

D. new buyers enter the market

E. new firms enter the market

Question 2

The demand for textbooks is Q = 200 – P + 25U – 50Pbeer. Assume that the unemployment rate U is 8 and the price of beer Pbeer is \$2. When the average price of a textbook is P = \$100, the price elasticity of demand is:

Select one:

A. -1.0

B. -2.0

C. -0.5

D. -50

E. -5.0

Question 3

The price elasticity of demand for Portland cement at a local retail outlet is -3 at the current price of \$3. If the marginal cost is \$2, then the store manager should:

Select one:

A. increase the price to \$4

B. lower the price to \$2.75

C. quit selling cement

D. leave the price unchanged

E. lower the price to \$2.50

Total revenue can be defined as:

Select one:

A. average revenue multiplied by marginal revenue

B. average revenue divided by marginal revenue

C. average revenue multiplied by output

D. average revenue divided by output

E. marginal revenue divided by output

Question 5

The demand for a product is more inelastic the:

Select one:

A. more narrowly defined the product

B. longer the time period covered

C. lower the average income of consumers

D. better the available substitutes

E. poorer the available substitutes

Question 6

Marginal revenue can be defined in terms of price (P) and elasticity (h) as:

Select one:

A. MR = P(h + 1/h)

B. P = MR(1/h)

C. MR = Ph

D. MR = P(1 + 1/h)

E. P = MR(1 – 1/h)

Question 7

If price is \$25 when the price elasticity of demand is -0.5, then marginal revenue must be:

Select one:

A. \$50

B. -\$25

C. \$12.50

D. \$37.50

E. \$25

Question 8

If the marginal cost of seating a theatergoer is \$5 and the elasticity of demand is -4, the profit-maximizing price is:

Select one:

A. \$3.33

B. \$5.00

C. \$10.00

D. \$13.33

E. \$6.67

Question 9

Marginal revenue can be defined as the:

Select one:

A. percent increase in total revenue resulting from a one percent increase in output

B. increase in total revenue resulting from a one unit increase in output

C. total revenue divided by output

D. average revenue multiplied by output

E. average revenue multiplied by output divided by 4

Question 10

A manufacturer of infant clothes has found that the demand for its product is given by Q = 100P-1.25A0.5, where P is price and A is advertising expenditures. The price elasticity of demand for these infant clothes is:

Select one:

A. -0.8

B. -1.25

C. -1.0

D. -2.5

E. -0.5

Question 11

The income elasticity of demand is defined as the:

Select one:

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

B. change in the quantity demanded divided by the change in per capita income

C. percentage change in income divided by the percentage change in the quantity demanded

D. change in per capita income divided by the change in the quantity demanded

E. percentage change in the quantity demanded divided by the percentage change in per capita income

Question 12

Consumer surplus is defined as:

Select one:

A. the quantities of a good or service that bring equal utility to the consumer

B. the quantity of a good or service that is utility maximizing for the consumer

C. the difference between what a consumer is willing to pay and what he or she actually pays for a good or service

D. the difference between the market price and the marginal cost of producing a good or service

E. none of the above

Question 13

Consumer surplus is important to firms because:

Select one:

A. it represents value consumers receive that they do not pay for

B. market prices must incorporate consumer surplus

C. they must pay taxes based on the level of consumer surplus

D. if firms can capture it, they can increase their profitability

E. a and d

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