Question

# Q8. Cross-price elasticity of demand is calculated as the A) percentage change in quantity demanded divided...

Q8. Cross-price elasticity of demand is calculated as the

A) percentage change in quantity demanded divided by percentage change in price of a good.

B) percentage change in quantity demanded of one good divided by percentage change in price of a different good.

C) percentage change in quantity sold divided by percentage change in buyers' incomes.

Q.9. If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

A) substitutes. B) complements. C) inferior. D) normal. D) percentage change in quantity supplied divided by percentage change in price of a good.

Q.10. Suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result, CineArts Videos experienced a 16 percent decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships?

A) -1.6 B) -0.625 C) 0.625 D) 1.6

Q.11) Suppose you are in charge of pricing at Apple Computer and you wish to increase revenues from your Macintosh line. Apple's chief economist informs you that the price elasticity of demand for Macintoshes is estimated to be E = - 1.17. Based on this information, you would:

a) increase price. b) decrease price. c) not change price. d) not enough information to make a rational decision.

Q.12 Marginal utility:

A. is the change in total utility caused by the consumption of an addition unit of a good.

B. is equal to total utility divided by total consumption.

C. always decreases as consumption increases.

D. is never negative.

E. all of the above.

13. According to the law of diminishing marginal utility:

A. marginal utility always falls with the extra consumption of a good.

B. a consumer inevitably reaches a point where the additional satisfaction from consuming each additional unit of a good rises.

C. a consumer inevitably reaches a point where he or she decreasingly values additional units of a good.

D. utility is easily measured by dollar values.

E. none of the above.

Q. 14. If total utility is increasing, marginal utility:

A. must be increasing.

B. must be decreasing.

C. may either be increasing or decreasing, although it must be greater than zero.

D. must be increasing at an increasing rate.

E. none of the above.

Cross price elasticity(CE) = %change in quantity demanded of one good/%change in the pirce of other good.

If CE is negative then goods are complement goods.

If CE is positive the goods will be substitute goods.

10) CE = (-16%)/(-10%) = 1.6

11) Answer is B. ( If demand is elastic then a fall in price leads to a higher quantity demanded and therefore hgher total revenue(.

13)C

14) C

If total utility is increasing ,marginal utility will surely be osive however i may decrease or increase or stay constant.

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