Question

1. A company make profits of $22,000 on each of its five low end products $50,000 for each of the two mid end ones and $270,000 from one top product. The number of products contributing less than the mean profit is

a) 4 b) 7 c) 5 d) 6 e) 0

2. Of most of the prices in a large data set are of approximately the same magnitude except for a few observations that are quite a bit larger, how would the mean and median of the data set compare and what shape would a histogram of the data set have?

a) the mean would be equal to the median and the histogram would be symmetrical

b) the mean would be smaller than the median and the histogram would be skewed with a long right tail.

c) the mean would be larger than the median and the histogram would be skewed with a long left tail

d) the mean would be larger than the median and the histogram would be skewed with a long right tail

e) the mean would be smaller than the median and the histogram would be skewed with a long left tail

3. What are the assumptions behind the two pricing strategies and what are their strength and weakness?

4. Suppose a university decides to raise tuition fees to increase the total revenue it receives from students. This strategy will work if the demand for education at the university is..

a) unit elastic b) inversely related to price c) elastic d) inelastic e) perfectly elastic

Answer 1

3. A key assumption in economic theory is that consumers tend to rather intensively process the prices of products they buy.The lower pricing strategy will work with customers but you can maintain quality with higher pricing. And for lower pricing you need to sell more to make a profit but with higher pricing you can make large profit by selling less. But it all depends on the market and relevant customers.

4. This strategy will work if the demand for education at the university is  insensitive to changes in price or income. So the answer will be d)inelastic.