Managerial Economics Quiz 2: 16 August 2026 (May 2026 term)

A monotonic transformation preserves the exact same ranking of consumer preferences.

If the price elasticity of demand for a product is greater than one, a price increase will always increase total revenue for the seller

If demand for a good is perfectly inelastic, consumers bear none of the burden of a per-unit tax placed on the good

First degree price discrimination is the practice of charging each customer her reservation price.

The cross price elasticity of demand of substitutes is positive.

A good with an income elasticity of demand greater than zero is classified as a normal good

Equilibrium quantity (in millions) in the market before the subsidy will be Q*= _______

Equilibrium price in the market before the subsidy will be P*= _______

New equilibrium quantity after the subsidy QS= _________

Price that buyers pay now will be PB= ________

Price that the producers receive per unit will be PS= _________

Total cost (in millions $) to the government will be _______

Suppose the government acts weirdly and removes the subsidy to impose a tax of $6 excise tax per unit to producers New equilibrium quantity (in millions $) after the incidence of tax Qt= ________

Suppose the government acts weirdly and removes the subsidy to impose a tax of $6 excise tax per unit to producers The price that buyers pay now will be PB = _______

Suppose the government acts weirdly and removes the subsidy to impose a tax of $6 excise tax per unit to producers
Price that seller receives per unit will be PS= _______

Suppose a monopolist has a constant marginal cost MC = 2 and faces the demand curve P = 20 − Q. There are no fixed costs.
Based on the above data, answer the given subquestions.

What will be the price charged by this monopolist? P*= _______

Suppose a monopolist has a constant marginal cost MC = 2 and faces the demand curve P = 20 − Q. There are no fixed costs.
Based on the above data, answer the given subquestions.

Suppose price discrimination is not allowed (or is not possible). How large will the producer surplus be? PS= _______

Suppose a monopolist has a constant marginal cost MC = 2 and faces the demand curve P = 20 − Q. There are no fixed costs.
Based on the above data, answer the given subquestions.

Suppose the firm can engage in perfect first-degree price discrimination. What is the increase in producer surplus when a monopolist switches from uniform pricing to perfect first-degree price discrimination? PS= ______

Based on the above data, answer the given subquestions.

Suppose that both Air India and Indigo charge a price of $300 each for a round-trip ticket between Kolkata and Delhi. What is the price elasticity of demand for Indigo flights between Kolkata and Delhi? (please ignore the sign)

Based on the above data, answer the given subquestions.

What is the market-level price elasticity of demand for air travel between Kolkata and Delhi when both airlines charge a price of $300? (please ignore the sign)

Based on the above data, answer the given subquestions.

M weakly dominates T

Based on the above data, answer the given subquestions.

B strictly dominates M

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Choose the correct alternative.

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Choose the correct alternative

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Suppose the consumer's income is $100, and the price of food is $1 and clothing is $2.
What is the slope of the budget line (ignore sign) ________

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Suppose the consumer's income is $100, and the price of food is $1 and clothing is $2.
What is the optimal level of clothing? _______

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Suppose the consumer's income is $100, and the price of food is $1 and clothing is $2.
What is the optimal level of food? ________

A consumer purchases two goods, food and clothing. He has the utility function U(x,y) = xy + 10x, where x denotes the amount of food consumed and y the amount of clothing. Based on the above data, answer the given subquestions.

Suppose the consumer's income is $100, and the price of food is $1 and clothing is $2.
What is the utility of the optimal bundle? ________