Knowledge Check /Week 6 / ECO/561 ECO 561 ECO561

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1. If the demand curve is QD = 100 – 10P and there is a $1 price increase, then the elasticity of demand at P = 2 is

 

  • A. -0.25
  • B. -0.5
  • C. -0.75
  • D. -1

 

2. If the absolute value of a demand elasticity is less than 1, then

 

  • A. the demand is inelastic, and a price rise will reduce the total revenue
  • B. the demand is inelastic, and a price rise will increase the total revenue
  • C. the demand is elastic, and a price rise will reduce the total revenue
  • D. the demand is elastic, and a price rise will increase the total revenue

 

3. If the cross-price elasticity is negative, then the two goods are

 

  • A. unrelated
  • B. substitutes
  • C. complements
  • D. normal goods

 

4. Under perfect competition, a firm maximizes its profit by setting

 

  • A. P = MC because P = MR
  • B. P above MC where MC = MR
  • C. P = FC

 

5. In a large city, a good, real-world example for perfect competition would be

 

  • A. lawyers
  • B. gas stations
  • C. Time Warner Cable
  • D. clothing stores

 

 

 

6. A firm under monopolistic competition will earn

 

  • A. positive economic profit because it has some monopoly power
  • B. zero economic profit because it sets P = MC
  • C. zero economic profit because its P = ATC
  • D. positive economic profit because it sets MC = MR

 

 

 

    • 7 years ago
    eco 561 Week 6 Knowledge Check / (6/6 correct)
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