ECON-E 201 Exam Solutions Fall 2018: Profit Maximization, Marginal Revenue, Average Variable Cost

1. Suppose the government wants to raise revenue by implementing a per-unit excise tax on the sellers of several goods. In which of the following demand and supply curve combinations would the goverment's goal be most successful? MUA highly elastic supply and demand highly inelastic supply and demand highly elastic demand and highly inelastic supply highly inelastic demand and highly elastic supply

Many economics texts define goods A and B as complements if the demand for A decreases when the price of B increases. This definition assumes A. B A and B are both normal goods. the price increase in B was caused by an increase in the demand for B. the price increase in B was caused by an exogenous change not related to a change in demand for B. All of the above are true. D.

Ch. 6: Simple Pricing

a. define the Law of Demand?

b. Explain the distinction between a change in demand and a change in quantity demanded?

c. create a demand curve from a simple demand schedule in Table 6.2?

d. determine the calculated values in a table such as Table 6.4?

e. Can you apply your understanding of Chapter 4s marginal analysis to pricing decisions in a price-making (versus price-taking) firm?

f. Can you explain in words what Own Price Elasticity, Cross-Price Elasticity, and Income Elasticity mean?

g. Given specific values for Own-Price Elasticity of Demand, can you determine whether demand for the good is elastic, inelastic, or unit elastic?

h. Given specific values for Cross-Price Elasticity, can you determine whether the two goods are substitutes or complements?

i. Given specific values for Income Elasticity, can you determine whether the good is a normal or inferior good?

j. Can you calculate each of these elasticities, such as in the homework?

k. Identify relatively elastic and inelastic demand curves?

l. List factors that may affect demand elasticity.

m. Indicate whether total revenue will increase or decrease as a result of a price change, depending on the demand elasticity?

The textbook used for this assignment is Managerial Economics, Froeb Chapters.