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price-elastic demand curve

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1. If a company faces a price-elastic demand curve, it can increase the revenue by decreasing the price. True
False

2. F-test measures the statistical significance of each explanatory variable. True
False

3. A lawyer whose annual income used to be $150,000 quit the job and opened a restaurant. The total cost of operating the restaurant business is $100,000, and the annual revenue is $250,000. What is the lawyer's economic cost of running the restaurant business?
$100,000
$150,000
$250,000
$300,000
$50,000

4. Total revenue function is

TR = -Q(Q-10)
and total cost function is
TC = 2Q.
What is the profit-maximizing Q?
(Points: 5)
2
4
6
10
12

5. What was NOT the effect of the "voluntary export restraint" on Japanese cars in 1981?
Japan started to export high-end automobiles to U.S.
Domestic car prices jumped up.
U.S. consumers had to pay more to purchase cars.
Japanese auto manufacturers suffered a significant decrease in revenue.
US car auto manufacturers enjoyed higher profits.

7. ( ) method is a popular method of qualitative forecasting. Developed at the Rand Corporation in the 1950s, it is utilized predominantly in predicting technological trends and changes. It uses a panel of experts and unlike the jury of executive opinion, the participants do not meet ot discuss and agree on a forecast.

8.
Month Sales 3-Month Moving Average of Sales
Jan 843
Feb 939
Mar 1236
Apr 876 1006
May ( )
Note: Do not round the number. Write the whole number.

9. What is time-series data. Give an example. What is cross-sectional data. Give an example.

10. What is the key difference in assumption between a short-run production function and a long-run production function?

11. Diminishing returns are short-run phenomena. Define the law of diminishing returns. In a well-defined cubic production function, in which stage does it kick in?

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The expert assess a price-elastic demand curve.

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1. If a company faces a price-elastic demand curve, it can increase the revenue by decreasing the price. (Points: 5)
True
False
Answer: True, when the demand is in price elastic range, the decrease in price is more than compensated by the increase in demand and hence the total revenues are higher.

2. F-test measures the statistical significance of each explanatory variable. (Points: 5)
True
False
Answer: False. F test measures the statistical significance of overall regression model. The significance of each explanatory variables is checked using t-test.

3. A lawyer whose annual income used to be $150,000 quit the job and opened a restaurant. The total cost of operating the restaurant business is $100,000, and the annual revenue is $250,000. What is the lawyer's economic cost of running the restaurant business? (Points: 5)
$100,000
$150,000
$250,000
$300,000
$50,000
Answer:
Economic cost = Operating cost of restaurant + The opportunity cost of the Lawyers time
=100,000+150,000
=$250,000

4. Total revenue function is

TR = -Q(Q-10)
and total cost function is
TC = 2Q.
What is the profit-maximizing Q?
(Points: 5)
2
4
6
10
12
ANSWER:
At price maximizing Q, MC=MR
MR=dTR/dQ= -2Q+10
MC=dTC/dQ=2
So we have
-2Q+10=2
Solving we get Q=4

5. What was NOT the effect of the "voluntary export restraint" on Japanese cars in 1981? (Points: 5)
Answer: Japan started to export high-end automobiles to U.S.
Domestic car prices jumped up.
U.S. consumers had to pay more to purchase cars.
Japanese auto manufacturers suffered a significant decrease in revenue.
US car auto manufacturers enjoyed higher profits.

6. ...

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