Question

Please select true or false or uncertain

1.If the cross elasticity of demand is negative, then the demand curve is not a good measure of willingness to pay.

2. The income elasticity of demand can never exceed, in absolute terms, two times the price elasticity of demand, if the good in question is a superior good.

3. Since marginal costs cannot be negative, the firm will never operate at the point on the demand curve where the price demand elasticity is equal to -1.

4. The mark-up equation is only an approximation to the optimal pricing strategy. In order to know more precisely what the optimal price is, we need to know the complete cost structure of the firm.

5. Under perfect competition market segmentation is not the best strategy to follow. In that case it is best to charge a unique price to every customer.

6. If the marginal cost is zero, then the principle "marginal cost equals marginal benefit" is not operational. In that case firms will be unable to find the profit maximizing price using economic principles. They will have to rely on accounting principles.

Answer 1

1.If the cross elasticity of demand is negative, then the demand curve is not a good measure of willingness to pay: false

because if the cross elasticity of demand is negative that means the commodities are complementary goods

2. The income elasticity of demand can never exceed, in absolute terms, two times the price elasticity of demand, if the good in question is a superior good: true

3. Since marginal costs cannot be negative, the firm will never operate at the point on the demand curve where the price demand elasticity is equal to -1: false

because price elasticity of is demand always negative due to negative relation between price and quantity demanded

4. The mark-up equation is only an approximation to the optimal pricing strategy. In order to know more precisely what the optimal price is, we need to know the complete cost structure of the firm: false

market up equation is a optimal pricing strategy  

5. Under perfect competition market segmentation is not the best strategy to follow. In that case it is best to charge a unique price to every customer:false

because under perfect competition firm is price taker so can't charge unique price from every customer

6. If the marginal cost is zero, then the principle "marginal cost equals marginal benefit" is not operational. In that case firms will be unable to find the profit maximizing price using economic principles. They will have to rely on accounting principles: true