Question 1

The demand function is described by the equation q(p)= 30 - p/3.The inverse demand function is described by the equation

Accepted Answer

A) q(p)= 30 - 3p. 
B) p(q)= 90 - 3q. 
C) q(p)= 1/(30 - p/3). 
D) p(q)= 1/30 - q/3. 
E) p(q)= 30 - q/3. 
A) q(p)= 30 - 3p. 
B) p(q)= 90 - 3q. 
C) q(p)= 1/(30 - p/3). 
D) p(q)= 1/30 - q/3. 
E) p(q)= 30 - q/3.

Question 2

If a price changes, then changes in consumption at the intensive margin are changes that happen because consumers alter the amounts that they consume but do not either stop consuming or start consuming the good.

Accepted Answer

A) True 
 B)False

Question 3

The demand for watches is Q = 1,000P -2.50I2.Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand is

Accepted Answer

A) 1.0. 
B) 2.25. 
C)  2 
D)  -0.50. 
E) 2.50. 
A) 1.0. 
B) 2.25. 
C)  2 
D)  -0.50. 
E) 2.50.

Question 4

If the demand function is q = 3m/p, where m is income and p is price, then the absolute value of the price elasticity of demand decreases as price increases.

Accepted Answer

A) True 
 B)False

Question 5

The Laffer effect occurs only if there is a backward-bending labor supply curve.

Accepted Answer

A) True 
 B)False

Question 6

At the price of $100, tourists demand 237 airplane tickets.At the same price, business travelers demand 247.At the price $110, tourists demand 127 tickets and business travelers demand 127.Assuming that the demand curves of business travelers and tourists are both linear over this price range, what is the price elasticity of demand at the price $100?

Accepted Answer

A) -4.75 
B) -5.23 
C) -23 
D) -0.05 
E) none of the above. 
A) -4.75 
B) -5.23 
C) -23 
D) -0.05 
E) none of the above.

Question 7

The demand curve for a good is given by p = 160 - 6q, where p is the price and q is the quantity of the good.Suppose that the number of consumers in the economy doubles; a "clone" of each consumer, who has exactly the same demand curve as the original consumer, appears.The demand curve for the doubled economy is described by

Accepted Answer

A) p = 320 - 6q. 
B) p = 320 - 12q. 
C) p = 160 - 12q. 
D) p = 160 - 3q. 
E) p = 80- 3q. 
A) p = 320 - 6q. 
B) p = 320 - 12q. 
C) p = 160 - 12q. 
D) p = 160 - 3q. 
E) p = 80- 3q.

Question 8

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

Question 9

If the equation for the demand curve is q = 50 - 4p, then the ratio of marginal revenue to price is constant as price changes.

Accepted Answer

A) True 
 B)False

Question 10

If the price elasticity of demand for a normal good is constant, then a price increase of 10A2 will reduce demand by more if the original price is $1 than if the original price is $2.

Accepted Answer

A) True 
 B)False

Question 11

The demand for watches is Q = 1,000P -0.50I-1.Assume that per capita income I is $5,000.At a price P of $50, the price elasticity of demand is

Accepted Answer

A) 2.50. 
B) 1.0. 
C) -1. 
D) -1.50. 
E) 0.50. 
A) 2.50. 
B) 1.0. 
C) -1. 
D) -1.50. 
E) 0.50.

Question 12

If the amount of money that people are willing to spend on a good stays the same when its price doubles, then demand for that good must have a price elasticity of demand smaller in absolute value than 1.

Accepted Answer

A) True 
 B)False

Question 13

Bart Wurst runs the only hot-dog stand in a large park in a large boring town.On Sundays people in this town all sit in the park and sunbathe.For any t between 0 and 30, the number of people who are sitting within t minutes of Bart's stand is 10t2.People in Bart's town are lazy and hate to walk.They think that every minute of walking they do is as bad as spending $.10.Everybody in the park has a reservation price of $1 for a hot dog, where the cost of a hot dog includes the subjective cost of walking as well as the money price they have to pay when they get there.(Nobody has ever thought of fetching a hot dog for someone else.)Find a formula for the demand curve for Bart's hot dogs.Explain how you got it.

Accepted Answer

If Bart charges p, where 0 < p < 1, his

Question 14

Dr.Social Science has recently figured out how to clone consumers.His first effort was done on the population of Walla, Washington.Each original citizen got a clone who had exactly the same income and preferences.Which of the following statements describes what happened to the demand function for tuna-fish casseroles in Walla?

Accepted Answer

A) The elasticity doubled and the slope remained constant. 
B) The elasticity did not change at any price. 
C) The elasticity of demand doubled and the slope doubled. 
D) The elasticity halved and the slope remained constant. 
E) none of the above. 
A) The elasticity doubled and the slope remained constant. 
B) The elasticity did not change at any price. 
C) The elasticity of demand doubled and the slope doubled. 
D) The elasticity halved and the slope remained constant. 
E) none of the above.

Question 15

The demand for Craftmatic Adjustable Beds is described by 
Qc = P-1.40cI-0.60P0.20mA0.25, where Qc is the number of Craftmatic Adjustable Beds demanded, Pc is the price of a Craftmatic Adjustable Bed, I is per capita income, Pm is the price of a battery-powered massage pillow, and A is the advertising budget.
a.If the marginal cost of producing a Craftmatic Adjustable Bed is $200, what is the profit-maximizing price?
b.Per capita income in the United States is forecast to rise by 3% next year.How will this impact Craftmatic's sales?
c.The price of battery-powered massage pillows suddenly fell by 10%.How will this impact Craftmatic's sales?

Accepted Answer

a.$700.
b.Demand wil

Question 16

Marginal revenue is equal to price if the demand curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 17

If the elasticity of demand curve for barley is -1.50 at all prices higher than the current price, we would expect that when bad weather reduces the size of the barley crop, total revenue of barley producers will fall.

Accepted Answer

A) True 
 B)False

Question 18

If consumer 1 has the inverse demand function given by p = 15 - x and consumer 2 has the inverse demand function given by p = 20 - 3x, then the total quantity demanded by the two consumers is x = 7 when the price p, is 11.

Accepted Answer

A) True 
 B)False

Question 19

If the demand for the Weekly World News at a local grocery store is described by Q = 2,500 - 400P - I/10for I = $15,000 and P = $1.50, the marginal revenue of an additional paper sold at this store is

Accepted Answer

A) $.15. 
B) $.38. 
C) $.50. 
D) $1.50. 
E) $1. 
A) $.15. 
B) $.38. 
C) $.50. 
D) $1.50. 
E) $1.

Question 20

In Manifold, Missouri (pop.1,000), people all have the same tastes and they all like Buicks.Nobody wants more than one Buick, but a person with income $M is willing to pay about $.10M per year to have a Buick.Nobody in Manifold has an income greater than $50,000 and nobody has an income less than $10,000.For incomes, $M, between $10,000 and $50,000, the number of people with incomes greater than $M is about 1,250 - .025M.If it costs $2,000 a year to have a Buick, how many people in Manifold will demand Buicks?

Accepted Answer

A) 500 
B) 750 
C) 100 
D) 600 
E) 800 
A) 500 
B) 750 
C) 100 
D) 600 
E) 800

Exam 14: Market Demand-Part A

The demand function is described by the equation q(p)= 30 - p/3.The inverse demand function is described by the equation

If a price changes, then changes in consumption at the intensive margin are changes that happen because consumers alter the amounts that they consume but do not either stop consuming or start consuming the good.

The demand for watches is Q = 1,000P -2.50I2.Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand is

If the demand function is q = 3m/p, where m is income and p is price, then the absolute value of the price elasticity of demand decreases as price increases.

The Laffer effect occurs only if there is a backward-bending labor supply curve.

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

If the equation for the demand curve is q = 50 - 4p, then the ratio of marginal revenue to price is constant as price changes.

If the price elasticity of demand for a normal good is constant, then a price increase of 10A2 will reduce demand by more if the original price is $1 than if the original price is $2.

The demand for watches is Q = 1,000P -0.50I-1.Assume that per capita income I is $5,000.At a price P of $50, the price elasticity of demand is

If the amount of money that people are willing to spend on a good stays the same when its price doubles, then demand for that good must have a price elasticity of demand smaller in absolute value than 1.

Marginal revenue is equal to price if the demand curve is horizontal.

If the elasticity of demand curve for barley is -1.50 at all prices higher than the current price, we would expect that when bad weather reduces the size of the barley crop, total revenue of barley producers will fall.

If consumer 1 has the inverse demand function given by p = 15 - x and consumer 2 has the inverse demand function given by p = 20 - 3x, then the total quantity demanded by the two consumers is x = 7 when the price p, is 11.

If the demand for the Weekly World News at a local grocery store is described by Q = 2,500 - 400P - I/10for I = $15,000 and P = $1.50, the marginal revenue of an additional paper sold at this store is

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

Externalities-Part A

Externalities-Part B

Information Technology-Part A

The demand for watches is Q = 1,000P ^-2.50I².Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand is

The demand for watches is Q = 1,000P ^-0.50I^-1.Assume that per capita income I is $5,000.At a price P of $50, the price elasticity of demand is