AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based...

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AaBbCcDdEe Normal Text Box 1) The suggestion that a seller will try to set price based on what the market will beris explicit recognition of the constraint imposed by: A) the firms marginal cost of production. B) the price elasticity of demand for that item. C) the firms competitors. D) the need for most firms to earn positive economic profits over time if they are to remain in 2) By and large, the price of each item on a restaurant menu is A) an accurate reflection of the items marginal cost. B) based strictly on consumer demand C) a function of cost and the price elasticity of demand for the item D) a fixed multiple of the items total cost is.referred to as: A) avcragc cost pricing. B) percentage pricing C) rate-of-return pricing. D) matkup pricing. 4) Which of the following statements is correct? A) To maximize profit, a firm should apply a uniform markup to each product it sells B) The profit-maximizing firms ability to mark up price over average cost is limited by the price elasticity of demand for the product in question. C) It is not possible to maximize profits by using a markup pricing strategy D) Using markup pricing is more complicated than simply setting price equal to marginal cost 5) Assume a change in price causes the price clasticity of demand for a good (in absolute valuc) and marginal revenue to decrease. In this case we can conclude that the price of the good was: A) incrcascd B) held constant c) decrcased D) cannot be determined Print Layout View Sec 1 Pages of 3Words: 476 of 605L 100% MacBook Pro

BUAD 632 Reading Comprehension #4 6) Assuming the demand curve is downward sloping, as price increases, the price eiasticity of demand for a good (in absolute value) and marginal revenue: A) increass B) stay the same. C) decreasS D) Canas be determined. 7) When the marginal revenue resulting from a decrease in price is negative, demand for product is A) clastic B) unit elastic. C) inclastic D) cannot be determined without more information 8) When demand is elastic, the marginal revenuc resuluing from a decrease in prices A) positivs в) za. C) ncgative D) cannot be determined without more information 9) At the profit-maximizing level of output, the amount by which the firm can mark up price is: A) invercly related to the price elasticity of demand for item in question. B) dinstly related to the price elasticity of demand for item in question. C) totally unrelated to the price elasticity of demand for item in question. D) cqual to the ratio of the marginal and average costs of production. 10) Assume the price elasticity of demand for a product is 4. In this case, the firms optimal makup is (approximately): A) 400 percent. B) 100 percent C) 33 percent. D) 25 percent Print Layout View Sec 1: Pages: 2of3 | woras: 470 of 605 LI 100% MacBook Pro F1 F3 FS 2 3 4 56 7

BUAD 632 Reading Comprehension BUAD 632 Reading Comprehension #4 11) Which of the following statements is correct? A) The markup.pricing rule that is derived from the rule for profit maximization can be s d a substitute for determining the profit-maximizing level of output by equating marginal revenue and marginal cost. B) It is reasonable to assume that a profit-maximizing firm will never operate in the inelastic portion of its demand curve. C) The ability of a profit-maximizing the price elasticity of demand for the firms output D) The markup factor and the price elasticity of demand are positively related, i.e., as the price elasticity of demand increases, the markup factor that the profit-maximizing firm can apply to its marginal cost in setting price increases as well. firm to mark up price above average cost is unaffected by Print Layout View Sec 1 Pages: 3 of 3 Words: 476 of 605 IL 100% MacBook Pro

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Answer 1

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1) The suggestion that a seller will try to set price based on what the market will bear is explicit recognition of the constraint imposed by

the price elasticity of demand for that item as the price elasticity of demand measures the percentage change in demand with respect to percentage change in price and it will enable the seller the set the price which will not cause an undesired change in the percentage change in demand for the good.

Option (B)

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