Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A peck is 1/4 of a bushel.If the price elasticity of demand for peas is -0.10 when peas are measured in bushels,then when peas are measured in pecks,the price elasticity of demand for peas will be

Accepted Answer

A)  -0.10. 
B)  -0.40. 
C)  -0.03. 
D)  -0.20. 
E)  none of the above. 
A)  -0.10. 
B)  -0.40. 
C)  -0.03. 
D)  -0.20. 
E)  none of the above.

Question 3

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 4

At a large institution of higher learning,the demand for football tickets at each game is 100,000 - 8,000p.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)  $6.25 
B)  $5 
C)  $12.50 
D)  $3.13 
E)  $18.75 
A)  $6.25 
B)  $5 
C)  $12.50 
D)  $3.13 
E)  $18.75

Question 5

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 6

In a certain city,the demand function for crack cocaine is q = 1,000 - p,where p is the street price.The cocaine industry is competitive.Cocaine distributors can buy as much cocaine as they wish at a price of $50 per unit from Colombian sources.Whenever the city narcotics police catch a cocaine dealer,they confiscate all the cocaine that he has.The jails are full so they do not imprison the dealers.The police are able to catch the dealers about half the time,so they get about half the cocaine that enters the city.Instead of destroying confiscated crack,the police simply resell it on the street.If the original supply curve of cocaine on the streets was horizontal,what is the net effect of police activities on the market for crack in this city?

Accepted Answer

A)  The amount purchased on the street is about 50 units smaller than it would be with no enforcement. 
B)  There is no effect,since all of the drugs reach consumers anyway. 
C)  Crack dealers will stop dealing in this city altogether,since they can make more money elsewhere. 
D)  The amount of crack purchased on the street decreases by about half. 
E)  The quantity purchased by dealers rises to make up for the amount that is confiscated. 
A)  The amount purchased on the street is about 50 units smaller than it would be with no enforcement. 
B)  There is no effect,since all of the drugs reach consumers anyway. 
C)  Crack dealers will stop dealing in this city altogether,since they can make more money elsewhere. 
D)  The amount of crack purchased on the street decreases by about half. 
E)  The quantity purchased by dealers rises to make up for the amount that is confiscated.

Question 7

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 8

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 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

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)=(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 12

At the price of $100,tourists demand 267 airplane tickets.At the same price,business travelers demand 237.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)  -4.96 
B)  -25 
C) -5.46 
D)  -0.05 
E)  none of the above. 
A)  -4.96 
B)  -25 
C) -5.46 
D)  -0.05 
E)  none of the above.

Question 13

The demand for cable television hookups is Q = 100 - 10P0.5+2I2,where P is price and I is per capita income.Cable TV is

Accepted Answer

A)  a substitute good. 
B)  a normal good. 
C)  an inferior good. 
D)  a natural monopoly. 
E)  a complement good. 
A)  a substitute good. 
B)  a normal good. 
C)  an inferior good. 
D)  a natural monopoly. 
E)  a complement good.

Question 14

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 15

The demand for Craftmatic Adjustable Beds is described by Qc=P-1.60cI-0.80P1.20mA0.25,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 impace Craftmatic's sales?

Accepted Answer

a.$533.33.
b.Demand

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

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

Question 18

The market demand curve is simply the horizontal sum of the individual demand curves.

Accepted Answer

A) True 
 B)False

Exam 15:Market Demand-Part A

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

A peck is 1/4 of a bushel.If the price elasticity of demand for peas is -0.10 when peas are measured in bushels,then when peas are measured in pecks,the price elasticity of demand for peas will be

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.

At a large institution of higher learning,the demand for football tickets at each game is 100,000 - 8,000p.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?

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

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 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.

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

The demand for cable television hookups is Q = 100 - 10P0.5+2I2,where P is price and I is per capita income.Cable TV is

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

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

The market demand curve is simply the horizontal sum of the individual demand curves.

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

The demand for cable television hookups is Q = 100 - 10P^0.5+2I²,where P is price and I is per capita income.Cable TV is