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MBA Exit Exam with complete
solutions latest version
The demand and supply curves show the relationship between the... - CORRECT
ANSWER-market price level when the amount of a good that is demanded holding all
other factors constant.
The degree to which quantity demanded 'reacts' to price changes can be determined
with the ____ of demanded. - CORRECT ANSWER-elasticity
The law of demand states that as prices rise, quantity demanded ____ (and vice-versa).
- CORRECT ANSWER-falls
Quantity supplied is _____(positively/negatively) associated with price increases,
though the degree to which quantity supplied can respond to price changes depends on
the elasticity of supply. - CORRECT ANSWER--positively
Goods that are easily made (low marginal cost) are _____(more/less) elastic than those
that are not.
Ex: capacity constraints of a generator or factory, or seats in a stadium - CORRECT
ANSWER-more
Goods that are easily made are ____(low/high) marginal cost. - CORRECT ANSWER--
low
What are 'comparative statistics?' - CORRECT ANSWER-- changes in equilibrium price
and quantity
T/F: If a 'determinant' of demand or supply changes, then the entire price-quantity
relationship changes. - CORRECT ANSWER--true
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Example of comparative statistics? - CORRECT ANSWER-- an increase in demands
that occurs because there has been a positive income shock is expected to increase the
amount bought of a good-even holding prices constant.
What are the 5 important demand determinants? - CORRECT ANSWER-1. Tastes and
preferences (ex: increase in demand for organic products)
2. Income/wealth (ex: fall in restaurant demand during recessions)
- important differences for normal goods and inferior goods
3. Price of other related goods (ex: change in demand for taxi services after entrance of
low-cost ride-share options).
4. Exogenous shocks (Ex: change in demand for generators following long-lasting
power outage).
5. Future expectations (ex: change in demand for toilet paper during COVID crisis).
What are the 3 primary important supply determinants? - CORRECT ANSWER-1. Input
costs (increase in supply due to innovation to cost-saving technology).
2.Government regulation (ex: new taxes and subsidies)
3. Price of other goods you produce (ex: switch in production to product that can
command higher price in the market).
What results in comparative statistics? - CORRECT ANSWER-Resulting change in
equilibrium price and quantity following a change to supply and/or demand.
What are comparative statistics used for? - CORRECT ANSWER--used to compare two
'statistic' states of the world- before and after some innovation in supply/demand (ex:
supply shock).
T/F: price/quantity change is also impacted by the elasticity of supply and demand. -
CORRECT ANSWER-true
If there is an increase in demand when supply is perfectly elastic, this will cause the
equilibrium quantity to .... - CORRECT ANSWER-increase, but price will remain the
same.
What guides economic behavior? - CORRECT ANSWER--price movements guide
economic behavior-reduce surpluses and shortages
If a market is not equilibrium and there is no intervention preventing price movement,
then price is expected to do what two things? - CORRECT ANSWER-1. decrease
(surplus)
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2. increase (shortage)
Market failures and market intervention impedes the ___ from functioning as an efficient
"coordinating" mechanism. - CORRECT ANSWER-- prices
Broadly elasticities measure the ______ of one variable to a change in another variable.
- CORRECT ANSWER-- responsiveness
Elasticities and total revenue: if demand is inelastic, then total revenue is expected to
___following a piece increase (and vice versa). - CORRECT ANSWER--increase
Elasticities and total reveue: If demand is elastic, then total revenue is expected to ___
following a price increase (and vice versa). - CORRECT ANSWER--decrease
The optimal price for a firm with market power can be recovered using the Lerner Index
or ____ rule. - CORRECT ANSWER-inverse-elasticity rule
T/F: Elasticities can be recovered from estimated demand functions - CORRECT
ANSWER-True
- ex:regression of quantity demanded on data including price, and other relevant
variables
Competitive markets exhibit what four features? - CORRECT ANSWER-1. There are
many buyers and sellers (firms are small compared to the market).
2. Firms produce perfect substitutes
3. There are free entry/exit into the market
4. Firms and consumers both have perfect information and have low/no transaction
costs
Given the competitive market features, firms in competitive markets have ___some/no)
power to choose a price different from the market price.
-ex: perfectly elastic demand curve at the market price - CORRECT ANSWER-no
Firms will profit maximize by choosing an ___amount. - CORRECT ANSWER--output
The optimal production level/quantity is when marginal revenues (MR).... - CORRECT
ANSWER--equal marginal costs (MC)
(MC)->MR=MC
What does the optimal production level/quantity imply? - CORRECT ANSWER--That
price is equal to marginal cost (ex: no market power).
BRAINSCAPE1
MBA Exit Exam with complete
solutions latest version
The demand and supply curves show the relationship between the... - CORRECT
ANSWER-market price level when the amount of a good that is demanded holding all
other factors constant.
The degree to which quantity demanded 'reacts' to price changes can be determined
with the ____ of demanded. - CORRECT ANSWER-elasticity
The law of demand states that as prices rise, quantity demanded ____ (and vice-versa).
- CORRECT ANSWER-falls
Quantity supplied is _____(positively/negatively) associated with price increases,
though the degree to which quantity supplied can respond to price changes depends on
the elasticity of supply. - CORRECT ANSWER--positively
Goods that are easily made (low marginal cost) are _____(more/less) elastic than those
that are not.
Ex: capacity constraints of a generator or factory, or seats in a stadium - CORRECT
ANSWER-more
Goods that are easily made are ____(low/high) marginal cost. - CORRECT ANSWER--
low
What are 'comparative statistics?' - CORRECT ANSWER-- changes in equilibrium price
and quantity
T/F: If a 'determinant' of demand or supply changes, then the entire price-quantity
relationship changes. - CORRECT ANSWER--true
BRAINSCAPE1
, BRAINSCAPE1
Example of comparative statistics? - CORRECT ANSWER-- an increase in demands
that occurs because there has been a positive income shock is expected to increase the
amount bought of a good-even holding prices constant.
What are the 5 important demand determinants? - CORRECT ANSWER-1. Tastes and
preferences (ex: increase in demand for organic products)
2. Income/wealth (ex: fall in restaurant demand during recessions)
- important differences for normal goods and inferior goods
3. Price of other related goods (ex: change in demand for taxi services after entrance of
low-cost ride-share options).
4. Exogenous shocks (Ex: change in demand for generators following long-lasting
power outage).
5. Future expectations (ex: change in demand for toilet paper during COVID crisis).
What are the 3 primary important supply determinants? - CORRECT ANSWER-1. Input
costs (increase in supply due to innovation to cost-saving technology).
2.Government regulation (ex: new taxes and subsidies)
3. Price of other goods you produce (ex: switch in production to product that can
command higher price in the market).
What results in comparative statistics? - CORRECT ANSWER-Resulting change in
equilibrium price and quantity following a change to supply and/or demand.
What are comparative statistics used for? - CORRECT ANSWER--used to compare two
'statistic' states of the world- before and after some innovation in supply/demand (ex:
supply shock).
T/F: price/quantity change is also impacted by the elasticity of supply and demand. -
CORRECT ANSWER-true
If there is an increase in demand when supply is perfectly elastic, this will cause the
equilibrium quantity to .... - CORRECT ANSWER-increase, but price will remain the
same.
What guides economic behavior? - CORRECT ANSWER--price movements guide
economic behavior-reduce surpluses and shortages
If a market is not equilibrium and there is no intervention preventing price movement,
then price is expected to do what two things? - CORRECT ANSWER-1. decrease
(surplus)
BRAINSCAPE1
, BRAINSCAPE1
2. increase (shortage)
Market failures and market intervention impedes the ___ from functioning as an efficient
"coordinating" mechanism. - CORRECT ANSWER-- prices
Broadly elasticities measure the ______ of one variable to a change in another variable.
- CORRECT ANSWER-- responsiveness
Elasticities and total revenue: if demand is inelastic, then total revenue is expected to
___following a piece increase (and vice versa). - CORRECT ANSWER--increase
Elasticities and total reveue: If demand is elastic, then total revenue is expected to ___
following a price increase (and vice versa). - CORRECT ANSWER--decrease
The optimal price for a firm with market power can be recovered using the Lerner Index
or ____ rule. - CORRECT ANSWER-inverse-elasticity rule
T/F: Elasticities can be recovered from estimated demand functions - CORRECT
ANSWER-True
- ex:regression of quantity demanded on data including price, and other relevant
variables
Competitive markets exhibit what four features? - CORRECT ANSWER-1. There are
many buyers and sellers (firms are small compared to the market).
2. Firms produce perfect substitutes
3. There are free entry/exit into the market
4. Firms and consumers both have perfect information and have low/no transaction
costs
Given the competitive market features, firms in competitive markets have ___some/no)
power to choose a price different from the market price.
-ex: perfectly elastic demand curve at the market price - CORRECT ANSWER-no
Firms will profit maximize by choosing an ___amount. - CORRECT ANSWER--output
The optimal production level/quantity is when marginal revenues (MR).... - CORRECT
ANSWER--equal marginal costs (MC)
(MC)->MR=MC
What does the optimal production level/quantity imply? - CORRECT ANSWER--That
price is equal to marginal cost (ex: no market power).
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