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ECO 561Week 6 Knowledge Check

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Question;ECO/561Week 6 Knowledge Check1.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.-0.25B.-0.5C.-0.75D.-12.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 revenueB.the;demand is inelastic, and a price rise will increase the total revenueC.the;demand is elastic, and a price rise will reduce the total revenueD.the;demand is elastic, and a price rise will increase the total revenue3.If the;cross-price elasticity is negative, then the two goods are;A.unrelatedB.substitutesC.complementsD.normal;goods4.Under;perfect competition, a firm maximizes its profit by setting;A.P =;MC because P = MRB.P;above MC where MC = MRC.P =;FC5.In a;large city, a good, real-world example for perfect competition would be;A.lawyersB.gas;stationsC.Time;Warner CableD.clothing;stores;6.A firm;under monopolistic competition will earn;A.positive;economic profit because it has some monopoly powerB.zero;economic profit because it sets P = MCC.zero;economic profit because its P = ATCD.positive;economic profit because it sets MC = MR

Paper#55336 | Written in 18-Jul-2015

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