Question 1

A firm faces a demand function D(p),for which the revenue-maximizing price is $10.The demand function is altered to 2D(p).What is the new revenue-maximizing price?

Accepted Answer

A)  $5 
B)  $20 
C)  $10 
D)  There is insufficient information to determine this. 
E)  none of the above. 
A)  $5 
B)  $20 
C)  $10 
D)  There is insufficient information to determine this. 
E)  none of the above.

Question 2

The constant elasticity of demand for cigarettes has been estimated to be 0.5.To reduce smoking by 25%,approximately how much tax needs to be added to a $1 pack?

Accepted Answer

A)  $.50. 
B)  $.75. 
C)  $.25. 
D)  $.13. 
E)  $4. 
A)  $.50. 
B)  $.75. 
C)  $.25. 
D)  $.13. 
E)  $4.

Question 3

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 4

Rollo would love to have a Mercedes.His preferences for consumption in the next year are represented by a utility function U(x,y),where x = 0 if he has no Mercedes and x = 1 if he has a Mercedes for the year and where y is the amount of income he has left to spend on other stuff.If U(0,y)= the square root of y and U(1,y)=(10/9)(y.5)and if Rollo's income is $50,000 a year,how much would he be willing to pay per year to have a Mercedes?

Accepted Answer

A)  $5,555.55 
B)  $5,000 
C)  $12,200 
D)  $9,500 
E)  $10,000 
A)  $5,555.55 
B)  $5,000 
C)  $12,200 
D)  $9,500 
E)  $10,000

Question 5

The demand function for potatoes has the quantity q = 1,000 - 10p.As the price of potatoes changes from 10A2 to 20A2,the absolute value of the price elasticity of demand for potatoes increases.

Accepted Answer

A) True 
 B)False

Question 6

Demand for Barbara Streisand CDs is equal to Qs =P2.50sI1.80P0.60c,where Qs is the number of CDs,Ps is the price of a Streisand CD,I is per capita income,and Pc is the price of a Karen Carpenter CD.Streisand and Carpenter CDs

Accepted Answer

A)  are inferior goods. 
B)  are substitutes. 
C)  are complements. 
D)  have diminishing returns to scale. 
E)  are not as good as the original 8-track tapes. 
A)  are inferior goods. 
B)  are substitutes. 
C)  are complements. 
D)  have diminishing returns to scale. 
E)  are not as good as the original 8-track tapes.

Question 7

If the marginal cost of making a photocopy is 2 cents and the elasticity of demand is 3,the profit-maximizing price is

Accepted Answer

A)  5 cents. 
B)  4 cents. 
C)  3.33 cents. 
D)  3 cents. 
E)  6 cents. 
A)  5 cents. 
B)  4 cents. 
C)  3.33 cents. 
D)  3 cents. 
E)  6 cents.

Question 8

An economy has 100 consumers of type 1 and 200 consumers of type 2.If the price of the good is less than $10,then each type 1 consumer demands 10- p units of the good;otherwise each type 1 demands zero.If the price of the good is less than 8,then each type 2 demands 24 - 3p;otherwise each type 2 demands zero.If the price of the good is 6,then the total amount of the good demanded will be

Accepted Answer

A)  1,600 units. 
B)  1,800 units. 
C)  2,000 units. 
D)  420 units. 
E)  1,200 units. 
A)  1,600 units. 
B)  1,800 units. 
C)  2,000 units. 
D)  420 units. 
E)  1,200 units.

Question 9

The constant elasticity of demand for cigarettes has been estimated to be 0.5.To reduce smoking by 75%,approximately how much tax needs to be added to a $1 pack?

Accepted Answer

A)  $.38. 
B)  $.75. 
C)  $1.50. 
D)  $2.25. 
E)  $4. 
A)  $.38. 
B)  $.75. 
C)  $1.50. 
D)  $2.25. 
E)  $4.

Question 10

The demand curve is inelastic for inferior goods and elastic for normal goods.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

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 14

The only quantities of good 1 that Tomoko can buy are 1 unit or 0 units.For all positive values of x2,Tomoko's preferences are represented by the utility function (x1 + 14)(x2+16).If her income is $20 and the price of good 2 is $1,then Tomoko's reservation price for good 1 is

Accepted Answer

A)  $.88. 
B)  $8.50. 
C)  $2.40. 
D)  $4.80. 
E)  $1.04. 
A)  $.88. 
B)  $8.50. 
C)  $2.40. 
D)  $4.80. 
E)  $1.04.

Question 15

When the price of bananas is 50 cents a pound,the total demand is 100 pounds.If the price elasticity of demand for bananas is -2,what quantity would be demanded if the price rose to 60 cents a pound?

Accepted Answer

A)  50 pounds 
B)  90 pounds 
C)  60 pounds 
D)  80 pounds 
E)  70 pounds 
A)  50 pounds 
B)  90 pounds 
C)  60 pounds 
D)  80 pounds 
E)  70 pounds

Question 16

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 and each Dodge owner has the demand function Dd =max.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 17

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 18

The demand curve for a good is given by p =60 - 8q,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 = 60 - 16q. 
B)  p = 120 - 8q. 
C)  p = 60- 4q. 
D)  p = 120- 16q. 
E)  p = 30 - 4q. 
A)  p = 60 - 16q. 
B)  p = 120 - 8q. 
C)  p = 60- 4q. 
D)  p = 120- 16q. 
E)  p = 30 - 4q.

Question 19

If the demand curve were plotted on graph paper with logarithmic scales on both axes,then its slope would be the elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 15:Market Demand-Part A

A firm faces a demand function D(p),for which the revenue-maximizing price is $10.The demand function is altered to 2D(p).What is the new revenue-maximizing price?

The constant elasticity of demand for cigarettes has been estimated to be 0.5.To reduce smoking by 25%,approximately how much tax needs to be added to a $1 pack?

The demand function for potatoes has the quantity q = 1,000 - 10p.As the price of potatoes changes from 10A2 to 20A2,the absolute value of the price elasticity of demand for potatoes increases.

Demand for Barbara Streisand CDs is equal to Qs =P2.50sI1.80P0.60c,where Qs is the number of CDs,Ps is the price of a Streisand CD,I is per capita income,and Pc is the price of a Karen Carpenter CD.Streisand and Carpenter CDs

If the marginal cost of making a photocopy is 2 cents and the elasticity of demand is 3,the profit-maximizing price is

The constant elasticity of demand for cigarettes has been estimated to be 0.5.To reduce smoking by 75%,approximately how much tax needs to be added to a $1 pack?

The demand curve is inelastic for inferior goods and elastic for normal goods.

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

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

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 Tomoko can buy are 1 unit or 0 units.For all positive values of x2,Tomoko's preferences are represented by the utility function (x1 + 14)(x2+16).If her income is $20 and the price of good 2 is $1,then Tomoko's reservation price for good 1 is

When the price of bananas is 50 cents a pound,the total demand is 100 pounds.If the price elasticity of demand for bananas is -2,what quantity would be demanded if the price rose to 60 cents a pound?

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 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 were plotted on graph paper with logarithmic scales on both axes,then its slope would be the elasticity of demand.

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.

Demand-Part A

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-Part A

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

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

Demand for Barbara Streisand CDs is equal to Q_s =P^2.50_sI^1.80P^0.60_c,where Q_s is the number of CDs,P_s is the price of a Streisand CD,I is per capita income,and P_c is the price of a Karen Carpenter CD.Streisand and Carpenter CDs

The only quantities of good 1 that Tomoko can buy are 1 unit or 0 units.For all positive values of x₂,Tomoko's preferences are represented by the utility function (x₁ + 14)(x₂+16).If her income is $20 and the price of good 2 is $1,then Tomoko's reservation price for good 1 is

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