Question 1

A person with a quasilinear utility function will

Accepted Answer

A) have a price elasticity of demand equal to zero for some goods. 
B) have an income elasticity of demand equal to one for some goods. 
C) necessarily consume zero quantity of some good. 
D) necessarily consume positive amounts of every good. 
E) none of the above. 
A) have a price elasticity of demand equal to zero for some goods. 
B) have an income elasticity of demand equal to one for some goods. 
C) necessarily consume zero quantity of some good. 
D) necessarily consume positive amounts of every good. 
E) none of the above.

Question 2

Using the graph of a demand curve, explain why marginal revenue is less than price.

Accepted Answer

Since marginal revenue is the additional

Question 3

Ethel is trying to decide whether to have 0 cars, 1 car, or 2 cars.If x is the number of cars she has and y is the amount of money she has per year to spend on other stuff, Ethel's utility function is U(x, y), where U(0, y)= y1/2, U(1, y)=0 (15/14)y1/2, and U(2, y)= (10/9)y1/2.Suppose that it costs $2,000 a year to have 1 car and $4,000 a year to have 2 cars.Ethel finds that the right thing to do depends on her income.
a.What is her willingness to pay for 1 car if her income is M?
b.What is the lowest income at which she would have a car?
c.What is the lowest income at which she would have 2 cars?

Accepted Answer

a.Her willingness to pay for 1 car is ab

Question 4

The inverse demand for a good is given by p = 60 - 2q.Suppose that the number of consumers doubles.(For each consumer in the market another consumer with an identical demand function appears.)The demand curve shifts to the right, doubling demand at every price, while the slope of the demand curve stays unchanged.

Accepted Answer

A) True 
 B)False

Question 5

If the price of leeks falls by $2 per pound, then the demand for leeks will rise by 10 pounds.Therefore we can conclude that the demand for leeks is elastic.

Accepted Answer

A) True 
 B)False

Question 6

If the demand curve is a linear function of price, then the price elasticity of demand is the same at all prices.

Accepted Answer

A) True 
 B)False

Question 7

If there are only two goods, an increase in the price of good 1 will increase the demand for good 2

Accepted Answer

A) if and only if the price elasticity of demand for good 2 is greater than 1 in absolute value. 
B) whenever both goods are normal goods. 
C) only if the two goods are perfect substitutes. 
D) never. 
E) none of the above. 
A) if and only if the price elasticity of demand for good 2 is greater than 1 in absolute value. 
B) whenever both goods are normal goods. 
C) only if the two goods are perfect substitutes. 
D) never. 
E) none of the above.

Question 8

If the price of cucumbers falls by $2 per pound, then the demand for cucumbers will rise by 10 pounds.Therefore we can conclude that the demand for cucumbers is elastic.

Accepted Answer

A) True 
 B)False

Question 9

A peck is 1/4 of a bushel.If the price elasticity of demand for oats is -0.60 when oats are measured in bushels, then when oats are measured in pecks, the price elasticity of demand for oats will be

Accepted Answer

A) 20.15. 
B) 22.40. 
C) 20.30. 
D) 21.20. 
E) none of the above. 
A) 20.15. 
B) 22.40. 
C) 20.30. 
D) 21.20. 
E) none of the above.

Question 10

In a small Kansas town, there are two kinds of gasoline consumers: 100 Buick owners and 50 Dodge owners.Each Buick owner has the demand function Db(p)= max{0, 20 - 5p} and each Dodge owner has the demand function Dd = max{0, 15- 3p}.In this town, the market demand curve has

Accepted Answer

A) no kinks but gets steeper as price rises. 
B) no kinks but gets flatter as price rises. 
C) constant slope since individual demand curves have constant slope. 
D) a kink at p = 4 and another at p = 5. 
E) a kink at p = 35/8. 
A) no kinks but gets steeper as price rises. 
B) no kinks but gets flatter as price rises. 
C) constant slope since individual demand curves have constant slope. 
D) a kink at p = 4 and another at p = 5. 
E) a kink at p = 35/8.

Question 11

If the demand function for tickets to a play is q = 7,500 - 75p, at what price will total revenue be maximized?

Accepted Answer

A) $100 
B) $200 
C) $50 
D) $25 
E) none of the above. 
A) $100 
B) $200 
C) $50 
D) $25 
E) none of the above.

Question 12

In general, aggregate demand depends only on prices and total income and not on income distribution.

Accepted Answer

A) True 
 B)False

Question 13

The demand for voice mail is Q = 1,000 - 150P + 20I.Assume that per capita disposable income I is $900.At a price P of $40, the income elasticity of demand is

Accepted Answer

A) 2. 
B) 4. 
C) 1.0. 
D) 20. 
E) 1.38. 
A) 2. 
B) 4. 
C) 1.0. 
D) 20. 
E) 1.38.

Question 14

The inverse demand function for soybeans is p = 30,000 - 6q.Total revenue in this market will be maximized when the quantity of soybeans produced is

Accepted Answer

A) 3,611 bushels. 
B) 5,000 bushels. 
C) 1,250 bushels. 
D) 2,500 bushels. 
E) none of the above. 
A) 3,611 bushels. 
B) 5,000 bushels. 
C) 1,250 bushels. 
D) 2,500 bushels. 
E) none of the above.

Question 15

The only quantities of good 1 that Irene can buy are 1 unit or 0 units.For all positive values of x2, Irene's preferences are represented by the utility function (x1 + 10)(x2 + 2).If her income is $8 and the price of good 2 is $1, then Irene's reservation price for good 1 is

Accepted Answer

A) $1.82. 
B) $1.50. 
C) $.91. 
D) $5. 
E) $.10. 
A) $1.82. 
B) $1.50. 
C) $.91. 
D) $5. 
E) $.10.

Question 16

If the equation for the demand curve is q = 20 - 2p, then the ratio of marginal revenue to price is constant as price changes.

Accepted Answer

A) True 
 B)False

Question 17

In Ozone, California, people all have the same tastes and they all like hot tubs.Nobody wants more than one hot tub but a person with wealth $W will be willing to pay up to $.01W for a hot tub.The number of people with a wealth greater than $W for any given W in Ozone is approximately 1,000,000/W.The price elasticity of demand for hot tubs in Ozone, California, is

Accepted Answer

A) -0.1. 
B) -0.01. 
C) -1. 
D) -0.4. 
E) none of the above. 
A) -0.1. 
B) -0.01. 
C) -1. 
D) -0.4. 
E) none of the above.

Question 18

If the marginal cost of brewing beer is 40 cents and the profit-maximizing price is 90 cents, then the price elasticity of demand is

Accepted Answer

A) -0.66. 
B) -1.8. 
C) -2. 
D) -2.33. 
E) -3. 
A) -0.66. 
B) -1.8. 
C) -2. 
D) -2.33. 
E) -3.

Question 19

The demand for tickets to a rock concert is given by D(p)= 200,000 - 10,000p, where p is the price of tickets.If the price of tickets is $17, then the price elasticity of demand for tickets is

Accepted Answer

A) -11.33. 
B) -8.50. 
C) -17. 
D) -2.83. 
E) -5.67. 
A) -11.33. 
B) -8.50. 
C) -17. 
D) -2.83. 
E) -5.67.

Question 20

At a large institution of higher learning, the demand for football tickets at each game is 100,000 - 6,000p.If the capacity of the stadium at that university is 60,000 seats, what is the revenue maximizing price for this university to charge per ticket?

Accepted Answer

A) $16.67 
B) $8.33 
C) $6.67 
D) $4.17 
E) $25 
A) $16.67 
B) $8.33 
C) $6.67 
D) $4.17 
E) $25

Exam 14: Market Demand-Part A

A person with a quasilinear utility function will

Using the graph of a demand curve, explain why marginal revenue is less than price.

If the price of leeks falls by $2 per pound, then the demand for leeks will rise by 10 pounds.Therefore we can conclude that the demand for leeks is elastic.

If the demand curve is a linear function of price, then the price elasticity of demand is the same at all prices.

If there are only two goods, an increase in the price of good 1 will increase the demand for good 2

If the price of cucumbers falls by $2 per pound, then the demand for cucumbers will rise by 10 pounds.Therefore we can conclude that the demand for cucumbers is elastic.

A peck is 1/4 of a bushel.If the price elasticity of demand for oats is -0.60 when oats are measured in bushels, then when oats are measured in pecks, the price elasticity of demand for oats will be

In a small Kansas town, there are two kinds of gasoline consumers: 100 Buick owners and 50 Dodge owners.Each Buick owner has the demand function Db(p)= max{0, 20 - 5p} and each Dodge owner has the demand function Dd = max{0, 15- 3p}.In this town, the market demand curve has

If the demand function for tickets to a play is q = 7,500 - 75p, at what price will total revenue be maximized?

In general, aggregate demand depends only on prices and total income and not on income distribution.

The demand for voice mail is Q = 1,000 - 150P + 20I.Assume that per capita disposable income I is $900.At a price P of $40, the income elasticity of demand is

The inverse demand function for soybeans is p = 30,000 - 6q.Total revenue in this market will be maximized when the quantity of soybeans produced is

The only quantities of good 1 that Irene can buy are 1 unit or 0 units.For all positive values of x2, Irene's preferences are represented by the utility function (x1 + 10)(x2 + 2).If her income is $8 and the price of good 2 is $1, then Irene's reservation price for good 1 is

If the equation for the demand curve is q = 20 - 2p, then the ratio of marginal revenue to price is constant as price changes.

If the marginal cost of brewing beer is 40 cents and the profit-maximizing price is 90 cents, then the price elasticity of demand is

The demand for tickets to a rock concert is given by D(p)= 200,000 - 10,000p, where p is the price of tickets.If the price of tickets is $17, then the price elasticity of demand for tickets is

At a large institution of higher learning, the demand for football tickets at each game is 100,000 - 6,000p.If the capacity of the stadium at that university is 60,000 seats, what is the revenue maximizing price for this university to charge per ticket?

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

In a small Kansas town, there are two kinds of gasoline consumers: 100 Buick owners and 50 Dodge owners.Each Buick owner has the demand function D_b(p)= max{0, 20 - 5p} and each Dodge owner has the demand function D_d = max{0, 15- 3p}.In this town, the market demand curve has

The only quantities of good 1 that Irene can buy are 1 unit or 0 units.For all positive values of x₂, Irene's preferences are represented by the utility function (x₁ + 10)(x₂ + 2).If her income is $8 and the price of good 2 is $1, then Irene's reservation price for good 1 is