ECO100Y1 Quiz: ECO100 Indart Term Test 1 Statistics

Technical Questions

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -2.0; (2) The income elasticity of demand is 1.5; and, (3) The cross-price elasticity of a related good is -3.5. What can you determine about consumer demand for your product from this information?



Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -.9; (2) The income elasticity of demand is .5; and, (3) The cross-price elasticity of a related good is 2.0. What can you determine about consumer demand for your product from this information?

What are the three determinants of price elasticity of demand

What are the three determinants of price elasticity supply?

Name and describe the three kinds of product innovation.

Name and describe a marketing approach (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe a statistical approach (that we discussed in class) or technique that can be used to understand consumer behavior and/or estimate demand.

Name a psychological model (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe the six types of consumers.

How do fixed and variable costs differ in the short-run and long-run?

Jim is considering quitting his job and using his savings to start a small business. He expects that his costs will consist of a lease on the building, inventory, wages, electricity, and insurance.

11A. Identify which costs are explicit and which are opportunity (implicit) costs.

11B. Identify which costs are fixed and which are variable.

What is the law of diminishing returns? What are economies of scale and diseconomies of scale? Be sure to note the terms apply to the short run and the long run.

Application Questions

1. How can entrepreneurs shift elasticity of demand and elasticity of supply? Draw on the three determinants for each in your answer.

2. How can entrepreneurs be innovative in production for the short-term and the long-term? Draw on concepts like diminishing returns, diseconomies of scale, and economies of scale in your answer.

A. A competitive firm

1. can consider only its location in setting the price.
2. must base its competitive price on product differentiation.
3. has the ability to set its own price.
4. must accept the price determined by the intersection of the market supply and demand curves.
5. has no supply curve.

B. If a firm is making an economic profit, then

1. the factors of production are being paid their opportunity costs.
2. there will be no change in the number of firms if the industry is perfectly competitive.
3. the factors of production are being paid less than their opportunity costs.
4. the factors of production are being paid more than their opportunity costs.
5. the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

1. marginal revenue is greater than price.
2. the elasticity of demand is constant.
3. marginal revenue decreases when the price decreases.
4. marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

1. shut down because economic profits are negative.
2. continue to produce as long as P > AVC.
3. continue to produce because accounting profits are positive.
4. set a higher price for its output.
5. set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

1. the marginal revenue curve.
2. perfectly inelastic.
3. always equal to marginal cost.
4. the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

1. monopolistic
2. oligopolistic
3. monopolistically competitive
4. perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

1. total revenue will fall if the price increases.
2. total revenue will be unchanged if the price increases.
3. total revenue will rise if the price increases.
4. the total supply will increase by an equal amount if demand increases.
5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

1. monopoly.
2. perfect competition.
3. theories of consumer behavior.
4. imperfect competition.
5. the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

1. perfect competition
2. monopolistic competition
3. oligopoly
4. monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

1. economic profits are zero.
2. TR > TC.
3. TR < TC.
4. P = AVC.
5. normal profits are zero.