Decision Analysis_Pricing

Multiple Choice

If the pastry shop has increased its price for a brioche from $2 to $2.30, what would a price elasticity of 1.9 imply about the quantity of these brioches sold? (Use the midpoint method of calculating price elasticity of demand.)

• Demand for the brioches is inelastic, so price changes do not affect quantity.

• Given the relatively elastic demand, the percentage change in quantity using the midpoint method is 26.5.

• Given the relatively elastic demand, the percentage change in quantity using the midpoint method is 7.3.

• This change in price of the brioche would imply an increase in the quantity sold.

Multiple Choice

If the demand for a product is elastic, a price increase will result in

• no change in total revenue.

• an indeterminate change in revenue.

• a decrease in total revenue.

• an increase in total revenue.

Multiple Choice

When a product has elastic demand, the percentage change in price

• is less than the percentage change in quantity demanded.

• results in an equal change in quantity demanded.

• is greater than the percentage change in quantity demanded.

• results in no change in quantity demanded.

Multiple Choice

If the price of computers increases and total revenue of the firm increases, then the demand for computers is

• elastic and the elasticity of demand is greater than one.

• inelastic and the elasticity of demand is less than one.

• elastic and the elasticity of demand is less than one.

• inelastic and the elasticity of demand is greater than one.

Multiple Choice

If a product has a price elasticity of demand of 2.0, the demand is considered to be:

• Perfectly elastic.

• Perfectly inelastic.

• Relatively elastic.

• Relatively elastic.

Multiple Choice

Which one of the following would cause the demand curve for bagels to shift to the left?

• An increase in the population.

• A decrease in the cost of muffins.

• An increase in the supply of bagels.

• A decrease in the price of bagels.

Multiple Choice

If the demand for a good is elastic, then a(n)

• decrease in price will increase total revenue.

• increase in price will have no effect on total revenue.

• decrease in price will decrease total revenue.

• increase in price will increase total revenue.

Multiple Choice

A profit-maximizing company is considering a price increase on a particular product. After extensive market research, the company has determined that demand for the product is price inelastic. Assuming all other factors remain constant, determine what course of action the company should take and the resulting impact on quantity demanded.

• Do not increase price; quantity demanded will decrease significantly.

• Do not increase price; minimal impact on quantity demanded.

• Increase price; quantity demanded will increase significantly.

• Increase price; minimal impact on quantity demanded.

Multiple Choice

If the price elasticity of demand for a normal good is expected to be 2.5, a 10% reduction in its price would cause:

• Quantity demanded to rise by 25%.

• Total revenue to fall by 25%.

• Total revenue to fall by 10%.

• Demand to decrease by 10%.

Multiple Choice

If a product’s demand is price elastic and there is a decrease in price, the effect will be:

• A decrease in total revenue.

• A decrease in total revenue and the demand curve shifts to the left.

• No change in total revenue.

• An increase in total revenue.

Multiple Choice

If a product’s price elasticity of demand is greater than one, then a 1% price increase will cause the quantity demanded to

• increase by less than 1%.

• decrease by more than 1%.

• decrease by less than 1%.

• increase by more than 1%.

Multiple Choice

Value engineering may result in all of the following except

• changing of product design

• reduce the cost of a product to or below target cost

• changing specifications of material used

• Value engineering focus on production activities while other activities along the value chain are not evaludated