1. A company currently sells 60,000 units a month at $10 per unit. The marginal cost per unit is $6. The company is considering raising the price by 10% to $11.
2. If the price elasticity of demand is in that price range, then profit would increase if the company decided to raise the price by 10%.a. Equal to -3b. Greater than +1c. Less than -3.5d. Greater than -22. The price elasticity of demand for bread is -0.5. If the price falls by 5%, the quantity demanded will change by:a. -2 .5%b. +2.5%c. -1.0%d. +10%
3. Actions a firm can take to change a product's demand curve include:a. Reducing the price of a substitute product the firm also produces.b. Reducing the price of a complementary product the firm also produces.c. Differentiating its product from competitors by offering an extended warrantee.d. All of the above will change a product's demand curve.
4. A product can be classified as a normal good if an increase in the income of buyers causes:a. A decrease in quantity demanded.b.
A decrease in demand.c. An increase in demand.d. An increase in quantity demanded.
5. Assume that beer and pretzels are complements in consumption; if the price of beer increases, we would expect to see:a. An increase in the demand for pretzels.b. A decrease in the demand for pretzels.c. An increase in the quantity of pretzels demanded.d. A decrease in the quantity of potatoes demanded.