MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? A) Output prices influence a firm's revenues. B) While managers must understand how output prices are determined, determination of input prices is irrelevant because it is beyond the manager's control. C) Price determination is the key element in any market system. D) Input prices influence a firm's costs of production. 2) If the price of gasoline increases significantly, then we'd expect the demand curve for large trucks and SUVs to A) shift to the left. B) not shift, but there will be a movement along that demand curve. C) shift to the right. D) become upward-sloping. 3) Suppose the price of movies seen at a theater rises from $12 per couple to $20. The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons. What is the arc price elasticity of demand for movies? A) 1.0 B) 0.5 C) 1.2 D) 0.8 4) Assume that when the price of good Z is increased from $5 to $6, the total revenue earned increases from $600 to $690. Based on this information, we can conclude that over this range, demand for Z is: A) unit elastic. B) perfectly inelastic. C) elastic. D) inelastic. 5) A car dealer wants to get rid of the stock of last year's model. Assume that the dealer knows from past experience that the price elasticity of demand for cars is unitary (= 1). If the price of the cars is currently $20,000 and the dealer wants to increase the quantity demanded from 30 units to 50 units, what must the new price be if the dealer is to sell the 20 additional cars? A) $12,000 B) $10,000 C) $18,000 D) $16,000 6) Assuming the inverse demand function for good Z can be written as P = 45 - 1.5Q, when P = 20, the point price elasticity of demand is equal to (approximately): A) -4.5. B) -O.80. C) -O.67. D) -O.22. $10 Price A 2 B Demand Quantity 7) Use Figure 21.2. When the price decreases from $10 to $2, total revenue A ) increases from areas B + C to areas A + B and demand is inelastic. B) increases from areas C + D to areas B + A and demand is elastic. ") decreases from areas A + B to areas B + C and demand is inelastic. ") decreases from areas A + B to areas B + C and demand is elastic. B) Suppose that goods A and B are close substitutes. If the price of good A falls, all else the same, then we would expect an 4 ) increase in the demand for A and an increase in the quantity of B demanded. B) increase in the demand for A and a decrease in the quantity of B demanded. C) increase in the demand for good A as well as for good B. D) increase in the quantity of A demanded and a decrease in the demand for B. 2) Use the following graph for a market to answer the question below. Supply P Price P1 Q1 Q2 Quantity Which of the following could not explain the indicated increase in equilibrium price from P1 to P2? A) a decrease in the price of a complement ary product B) an increase in the price of a substitute product [) an increase in production costs D ) an increase in consumer incomes 10) 8. Use the following graph for the milk market to answer the question below. 2