2025 MBA EXIT PRACTICE EXAM QUESTIONS QUESTIONS WITH
COMPLETE SOLUTIONS
The demand and supply curves show the relationship between the... - ✔✔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. - ✔✔elasticity
The law of demand states that as prices rise, quantity demanded ____ (and vice-versa). - ✔✔
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. - ✔✔-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 - ✔✔more
Goods that are easily made are ____(low/high) marginal cost. - ✔✔-low
,What are 'comparative statistics?' - ✔✔- changes in equilibrium price and quantity
T/F: If a 'determinant' of demand or supply changes, then the entire price-quantity relationship
changes. - ✔✔-true
Example of comparative statistics? - ✔✔- 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? - ✔✔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? - ✔✔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? - ✔✔Resulting change in equilibrium price and quantity
following a change to supply and/or demand.
What are comparative statistics used for? - ✔✔-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. - ✔✔true
If there is an increase in demand when supply is perfectly elastic, this will cause the equilibrium
quantity to .... - ✔✔increase, but price will remain the same.
What guides economic behavior? - ✔✔-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? - ✔✔1. decrease (surplus)
2. increase (shortage)
Market failures and market intervention impedes the ___ from functioning as an efficient
"coordinating" mechanism. - ✔✔- prices
Broadly elasticities measure the ______ of one variable to a change in another variable. - ✔✔-
responsiveness
Elasticities and total revenue: if demand is inelastic, then total revenue is expected to
___following a piece increase (and vice versa). - ✔✔-increase
Elasticities and total reveue: If demand is elastic, then total revenue is expected to ___ following
a price increase (and vice versa). - ✔✔-decrease
The optimal price for a firm with market power can be recovered using the Lerner Index or ____
rule. - ✔✔inverse-elasticity rule
T/F: Elasticities can be recovered from estimated demand functions - ✔✔True
- ex:regression of quantity demanded on data including price, and other relevant variables
COMPLETE SOLUTIONS
The demand and supply curves show the relationship between the... - ✔✔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. - ✔✔elasticity
The law of demand states that as prices rise, quantity demanded ____ (and vice-versa). - ✔✔
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. - ✔✔-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 - ✔✔more
Goods that are easily made are ____(low/high) marginal cost. - ✔✔-low
,What are 'comparative statistics?' - ✔✔- changes in equilibrium price and quantity
T/F: If a 'determinant' of demand or supply changes, then the entire price-quantity relationship
changes. - ✔✔-true
Example of comparative statistics? - ✔✔- 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? - ✔✔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? - ✔✔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? - ✔✔Resulting change in equilibrium price and quantity
following a change to supply and/or demand.
What are comparative statistics used for? - ✔✔-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. - ✔✔true
If there is an increase in demand when supply is perfectly elastic, this will cause the equilibrium
quantity to .... - ✔✔increase, but price will remain the same.
What guides economic behavior? - ✔✔-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? - ✔✔1. decrease (surplus)
2. increase (shortage)
Market failures and market intervention impedes the ___ from functioning as an efficient
"coordinating" mechanism. - ✔✔- prices
Broadly elasticities measure the ______ of one variable to a change in another variable. - ✔✔-
responsiveness
Elasticities and total revenue: if demand is inelastic, then total revenue is expected to
___following a piece increase (and vice versa). - ✔✔-increase
Elasticities and total reveue: If demand is elastic, then total revenue is expected to ___ following
a price increase (and vice versa). - ✔✔-decrease
The optimal price for a firm with market power can be recovered using the Lerner Index or ____
rule. - ✔✔inverse-elasticity rule
T/F: Elasticities can be recovered from estimated demand functions - ✔✔True
- ex:regression of quantity demanded on data including price, and other relevant variables
