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Wendy01

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发表于 2013-9-11 09:23 | 只看该作者

10.
If a price cut of a product increases total revenue, demand is best described as:
A.
  elastic
B.
  inelastic
C.
  unit elastic





Ans: A; a price cut will increase total revenue only if the decrease of price will cause a much more increase in quantity. So the demand is elastic.

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Wendy01

Rank: 2

UID
222274 
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339 
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76 
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2011-7-2 
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2013-9-15 
12#
发表于 2013-9-11 09:24 | 只看该作者

11.
A company determines that the quantity demanded of a product increases by 5% when price is reduced by 10%. The product’s price elasticity of demand is best described as:
A.
elastic
B.
inelastic
C.
perfectly elastic



Ans: B; Here, elasticity is

The magnitude of the elasticity coefficient is less than one, so we would say that demand is inelastic at that price.

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Wendy01

Rank: 2

UID
222274 
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339 
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76 
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2011-7-2 
最后登录
2013-9-15 
13#
发表于 2013-9-11 09:24 | 只看该作者

12.
Demand for guest rooms in a resort hotel increases from 100 to 150 rooms per night when the nightly room rate increases from $150 to $200. The elasticity of supply of guest rooms in the resort hotel is closest to:
A.
0.72
B.
1.40
C.
1.50



Ans: B; we use arc elasticity here:

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Wendy01

Rank: 2

UID
222274 
帖子
339 
主题
76 
注册时间
2011-7-2 
最后登录
2013-9-15 
14#
发表于 2013-9-11 09:24 | 只看该作者

13.
The cross elasticity of demand for a complementary product would most likely be:
A.
zero
B.
positive
C.
negative


Ans: C; two goods whose cross-price elasticity of demand is negative are defined to be complements.
Alternatively, substitutes have positive cross-price elasticity of demand.

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