If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of ...

If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
 a. products A and B are complementary.
  b. the cross elasticity of demand between these two products is positive.
  c. products A and B are substitutes.
  d. the demand for these products is inelastic.
  e. the total revenue earned from product A will decrease.

QUESTION 2

The point of maximum profit for a business firm is where:
 a. P = AC.
  b. TR = TC.
  c. MR = AR.
  d. MR = MC.
  e. TR = MR.

QUESTION 3

If a 1 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
 a. products A and B are complementary.
  b. the cross elasticity of demand between these two products is positive.
  c. products A and B are substitutes.
  d. the demand for these products is inelastic.
  e. the total revenue earned from product A will decrease.

QUESTION 4

A firm is currently operating where the MC of the last unit produced = 64, and the MR of this unit = 70 . What would you advise this firm to do?
 a. Shut down.
  b. Increase output.
  c. Stay at current output.
  d. Decrease output.
  e. Decrease price.

QUESTION 5

The cross elasticity of demand for complementary products must:
 a. be greater than one.
  b. be less than one.
  c. be zero.
  d. exceed zero.
  e. be negative.

QUESTION 6

A firm is currently operating where the MC of the last unit produced = 84, and the MR of this unit = 70 . What would you advise this firm to do?
 a. Shut down.
  b. Increase output.
  c. Stay at its current output.
  d. Decrease output.
  e. Decrease price.

QUESTION 7

The cross elasticity of demand for substitute products must:
 a. be greater than one.
  b. be less than one.
  c. be zero.
  d. exceed zero.
  e. be negative.