# Marginal revenue and elasticity relationship quiz

### True/False Quiz

The law of demand refers to the relationship between consumer income and the . output becomes more elastic, then the firm's marginal revenue will increase. Fall , Quiz #6 4) For a single-price monopolist, price is ______ marginal revenue. C) operate on the unit elastic portion of its demand curve. 18) One difference between equilibrium in perfectly competitive markets and single-price. Problem 2 develops the relationship between marginal revenue and the price elasticity of demand. Could it ever be profitable for a monopolist to produce an.

False If consumers expect the price of a commodity to increase in the future, then demand for the commodity will decrease. False Consumers find it easier to postpone the purchase of a durable good than to postpone the purchase of a nondurable good, so the demand for durable goods is more unstable than the demand for nondurable goods.

False Derived demand refers to the mathematical derivation of a market demand curve from individual consumers' demand curves.

False Derived demand by a firm will generally increase if the demand for the firm's output increases. False According to the estimated linear demand function presented in Casesweet potatoes are normal goods.

False Elasticity is a measure that does not depend on the units used to measure prices and quantities. True The price elasticity of demand is the same as the slope of a demand curve.

### Multiple Choice Quiz

False The arc price elasticity of demand measures the price elasticity at a point on the demand curve. False The price elasticity of demand for a firm's output is generally more elastic than the price elasticity of demand for the industry's output of the commodity.

False If price elasticity of demand for a firm's output becomes more elastic, then the firm's marginal revenue will increase. False If a firm increases the price of its product and total revenue increases, then the price elasticity of demand must be less than minus one.

## Quiz on Monopoly Name___________________________________

False If the price elasticity of demand for a firm's output is inelastic, then a decrease in price will reduce the firm's total revenue. False If the price elasticity of demand for a firm's output is unit elastic, then marginal revenue is equal to zero and total revenue is at a maximum. False If a firm is a perfect competitor, then its marginal revenue is equal to the price of its commodity.

False If a firm is not a perfect competitor, then its marginal revenue is greater than the price of its commodity. False An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity.

False The long-run price elasticity of demand for a commodity is generally greater then the short-run price elasticity of demand for the commodity.

True The income elasticity of demand for an inferior good is negative.

### What Is the Relationship Between Price Elasticity & Marginal Revenue? | Your Business

True For most goods, the income elasticity of demand is negative. True The cross-price elasticity of demand for two goods is negative if the goods are substitutes. False The cross-price elasticity of demand measures the percentage change in the demand for one good that results from a one percent change in the quantity demanded of a second good. False If two goods are very close complements, then the cross-price elasticity of demand between the two goods will be large and negative.

False It is likely that the cross-price elasticity of demand between two goods produced by different firms in the same industry will be positive and large. True Estimates of demand elasticities are used by firms to determine optimal operational policies.

False If the price elasticity of demand for a firm's output is inelastic, then the firm could increase its revenue by reducing price. True Decreased barriers to international trade have increased the differences in consumer preferences between countries.

Assume that the price also equals the minimum average total cost, so that the industry is in long-run equilibrium. Now imagine all the competitors merge to form a monopoly.

## True/False Quiz

Represent graphically the marginal revenue curve of the monopolist on the same graph as the demand and supply curve for the competitive industry. What output will the monopolist produce—will it be greater than, less than, or the same as the group of competitors? How will the price charged compare with the price under perfect competition?

The answers to these questions should enable you to answer problem 3. To answer problem 4, analyze graphically the effects of the demand shifts in parts a and b on the price and output of the monopolist and compare this to the effect of the same demand shifts on a group of competitors. A revenue-maximizing monopolist is concerned only with its revenues, not with its costs or profits.

If the monopolist produced an output where the revenue from the marginal unit was positive, what would happen to the total revenue of the monopolist if it increased its output?

If the monopolist produced an output where the revenue from the marginal unit was negative, what would happen to the total revenue of the monopolist if it increased its output? If the monopolist produced the output that maximized its revenues, what would the marginal revenue have to equal?

Elasticity and Revenue and its relationship.