Price elasticity of demand is calculated as the percentage change in quantity de

Question

Price elasticity of demand is calculated as
the percentage change in quantity demanded divided by the percentage change in price
the percentage change in price divided by the percentage change in quantity demanded
the absolute change in quantity demanded divided by the absolute change in price
the absolute change in price divided by the absolute change in quantity demanded


2. The price elasticity of demand
is of no use to producers
tells producers what will happen to total profit if they change product price
tells producers what will happen to quantity supplied if they change product price
tells producers what will happen to total revenue if they change product price


3. Along a linear demand curve,
both the slope and price elasticity are constant
the price elasticity is constant, but the slope varies
total revenues are constant
the slope is constant, but the price elasticity varies


4. Demand is more elastic
in the short run than in the long run
for necessities than for luxuries
for food than for hamburgers
for goods with many substitutes than for goods with only a few


5. Demand for a necessity, such as food, is
both income and price inelastic
income inelastic and price elastic
income elastic and price inelastic
both income and price elastic


6. The reason economists assume that firms try to maximize economic profit is
over time, firms that don't earn profits will have difficulty securing financing to survive
firms in the real world always maximize profit
profit is easier to calculate than revenues
if a firm fails to earn a profit in its first year, it will go out of business


7. Which of the following is a short-run adjustment?
Toyota builds an automobile plant in Kentucky.
Faced with increasing enrollment, a private college builds a new School of Business building.
Because of staggering losses, three insurance companies exit the industry.
People's Bank hires two new tellers to meet increased demand for customer services.


8. At the point where diminishing marginal returns set in, the slope of the total product curve is
positive and increasing
positive and decreasing
negative and increasing
negative and decreasing


9. Which of the following correctly describes the relationship between the marginal cost and average variable cost curves?
MC is everywhere above AVC
AVC is everywhere above MC
MC crosses AVC at AVC's minimum point
MC crosses AVC at MC's minimum point


10. The shape of the long-run average cost curve reflects
market demand
economies and diseconomies of scale
increasing and diminishing marginal returns
productivity of fixed inputs

Explanation / Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price 2. The price elasticity of demand tells producers what will happen to total revenue if they change product price 3. Along a linear demand curve, the slope is constant, but the price elasticity varies 4. Demand is more elastic for goods with many substitutes than for goods with only a few 5. Demand for a necessity, such as food, is both income and price inelastic 6. The reason economists assume that firms try to maximize economic profit is firms in the real world always maximize profit 7. Which of the following is a short-run adjustment? People's Bank hires two new tellers to meet increased demand for customer services. 8. At the point where diminishing marginal returns set in, the slope of the total product curve is positive and decreasing 9. Which of the following correctly describes the relationship between the marginal cost and average variable cost curves? MC crosses AVC at AVC's minimum point 10. The shape of the long-run average cost curve reflects economies and diseconomies of scale

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