Question 1

The average income level, as measured by the per capita GDP, has increased by 28% in Country X. Which of the following is most likely to happen in the market for denims, a normal good, in Country X?

Accepted Answer

A)   Consumers will expect the price of denims to remain the same in the future.
B)   The cost of producing denims will fall.
C)   The demand for substitutes for denims will increase.
D)   The demand curve for denims will shift to the right.E) C) and D)
F) All of the above

Question 2

A downward-sloping demand curve for beef implies that:

Accepted Answer

A)   as the price of beef rises, consumers may substitute other meats for beef.
B)   as the price of beef rises, consumers buy more beef because they can afford less of other
C)   as the price of beef falls, consumers substitute other meats for beef.
D)   as the price of other meats increases, consumers will buy less beef.E) A) and B)
F) C) and D)

Question 3

For a good that is price elastic, a fall in price will ____.

Accepted Answer

A)   shift the demand curve for the good to the left
B)   lead to a decrease in the quantity demanded of the good
C)   lead to a rise in the total revenue earned by the ﬁrm
D)   cause the supply curve for the good to become steeperE) C) and D)
F) None of the above

Question 4

The price elasticity of demand for a good measures _____.

Accepted Answer

A)   the correlation between the quality of a good and its price
B)   how responsive quantity demanded is to a change in price
C)   the correlation between income levels and quantity demanded
D)   how responsive demand is to a change in the price of substitute goodsE) B) and D)
F) A) and B)

Question 5

Describe the different degrees of price discrimination.

Accepted Answer

Under ?rst-degree price discrimination, ...

Question 6

At each stage of the product life cycle, the price elasticity of demand for the product is constant.

Accepted Answer

A) True 
 B)False

Question 7

If the cross price elasticity of two goods (X and Y)  is equal to 1, this means that _____.

Accepted Answer

A)   X and Y are complements
B)   total revenue will fall with an increase in the price of X
C)   X and Y are substitutes
D)   total revenue will increase with a fall in the price of YE) A) and B)
F) B) and D)

Question 8

Demand is more elastic at lower prices than at higher prices.

Accepted Answer

A) True 
 B)False

Question 9

If consumers expect a future rise in prices, they are likely to cut down on their current consumption.

Accepted Answer

A) True 
 B)False

Question 10

The demand curve for diamond jewellery, a luxury good, will shift outwards if _____.

Accepted Answer

A)   consumers' incomes' fall
B)   the price of platinum jewellery, considered a substitute for diamond jewellery, falls
C)   the price of diamond jewellery increases
D)   a new diamond mine is discovered, leading to an increase in the supply of diamondsE) C) and D)
F) B) and C)

Question 11

The demand for a good is elastic if the percentage change in price is greater than the percentage change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 12

Product X is composed of many different parts, each of which consumers value differently. All the different parts of the product, however, are not sold together. They are sold as a number of separate parts, each with an individual price. This practice is referred to as _____.

Accepted Answer

A)   de-bundling
B)   discounting
C)   price leadership
D)   cost-plus pricingE) All of the above
F) A) and B)

Question 13

Consumers must be allowed to resell goods for price discrimination to be successful.

Accepted Answer

A) True 
 B)False

Question 14

How will the demand for a product be affected by income?

Accepted Answer

The effect of income on demand...

Question 15

What is price discrimination?

Accepted Answer

Price discrimination is the act of charg...

Question 16

The level of competition provides an indication of how elastic demand is; the higher the level of competition, the less elastic demand will be.

Accepted Answer

A) True 
 B)False

Question 17

If a product is price elastic, then an increase in price will cause a decrease in total revenue earned.

Accepted Answer

A) True 
 B)False

Question 18

Two individuals paying the same price for a good will always derive the same amount of consumer surplus.

Accepted Answer

A) True 
 B)False

Question 19

If the price of a good increases by 20% and the quantity demanded of its complement falls by 18%, the cross-price elasticity for the two goods is _____.

Accepted Answer

A)   1
B)   0.9
C)   1.1
D)   2E) B) and C)
F) A) and B)

Question 20

A ﬁrm produces one unit of a good at a cost of £2. It sells 300 units of the good in the market at a price of £3 each. The ﬁrm's total revenue is equal to £600.

Accepted Answer

A) True 
 B)False

Exam 2: Consumers in the Marketplace

Two individuals paying the same price for a good will always derive the same amount of consumer surplus.

Correct AnswerverifiedShow Answer

A downward-sloping demand curve for beef implies that:

Correct AnswerverifiedShow Answer

If the price of a good increases by 20% and the quantity demanded of its complement falls by 18%, the cross-price elasticity for the two goods is _____.

Correct AnswerverifiedShow Answer

The demand for a good is elastic if the percentage change in price is greater than the percentage change in quantity demanded.

Correct AnswerverifiedShow Answer

The demand curve for diamond jewellery, a luxury good, will shift outwards if _____.

Correct AnswerverifiedShow Answer

Product X is composed of many different parts, each of which consumers value differently. All the different parts of the product, however, are not sold together. They are sold as a number of separate parts, each with an individual price. This practice is referred to as _____.

Correct AnswerverifiedShow Answer

The price elasticity of demand for a good measures _____.

Correct AnswerverifiedShow Answer

The average income level, as measured by the per capita GDP, has increased by 28% in Country X. Which of the following is most likely to happen in the market for denims, a normal good, in Country X?

Correct AnswerverifiedShow Answer

How will the demand for a product be affected by income?

Correct AnswerverifiedThe effect of income on demand...View AnswerShow Answer

Demand is more elastic at lower prices than at higher prices.

Correct AnswerverifiedShow Answer

What is price discrimination?

Correct AnswerverifiedPrice discrimination is the act of charg...View AnswerShow Answer

If the cross price elasticity of two goods (X and Y) is equal to 1, this means that _____.

Correct AnswerverifiedShow Answer

Consumers must be allowed to resell goods for price discrimination to be successful.

Correct AnswerverifiedShow Answer

For a good that is price elastic, a fall in price will ____.

Correct AnswerverifiedShow Answer

Describe the different degrees of price discrimination.

Correct AnswerverifiedUnder ?rst-degree price discrimination, ...View AnswerShow Answer

If a product is price elastic, then an increase in price will cause a decrease in total revenue earned.

Correct AnswerverifiedShow Answer

If consumers expect a future rise in prices, they are likely to cut down on their current consumption.

Correct AnswerverifiedShow Answer

At each stage of the product life cycle, the price elasticity of demand for the product is constant.

Correct AnswerverifiedShow Answer

A ﬁrm produces one unit of a good at a cost of £2. It sells 300 units of the good in the market at a price of £3 each. The ﬁrm's total revenue is equal to £600.

Correct AnswerverifiedShow Answer

The level of competition provides an indication of how elastic demand is; the higher the level of competition, the less elastic demand will be.

Correct AnswerverifiedShow Answer

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The effect of income on demand...
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Price discrimination is the act of charg...
View Answer

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Under ?rst-degree price discrimination, ...
View Answer

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