Exam2Solution

Exam2Solution - Exam 2 Solution 1. A horizontal demand...

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Exam 2 Solution 1. A horizontal demand curve would be referred to as being: a. perfectly inelastic. b. relatively inelastic. c. relatively elastic. *d. perfectly elastic. 2. Compliments have: a. a positive income elasticity. b. a positive price elasticity. c. a positive cross price elasticity. d. a negative income elasticity. *e. a negative cross price elasticity. 3. Assume that E D for a good equals -.75. If price is increased by 4%, quantity will: a. increase by 3%. b. increase by 5.333%. *c. decrease by 3%. d. decrease by 5.333%. 4. If the quantity demanded of a product rose from 900 to 1100 when the price of the product fell from $11 to $9, the price elasticity of demand is equal to: a. -1/11, or 0.09. b. -9/11, or 0.82. c. -11/9, or 1.22. *d. -1.0 5. If the demand curve is perfectly inelastic: a. price is determined solely by supply *b. quantity demanded is independent of price c. demand is unitarily elastic d. price is determined solely by demand 6. If the demand for a good is unitarily elastic, an increase in the price of the good will cause: a. total revenues on the good to fall. *b. total revenues on the good to remain constant. c. total revenues on the good to rise. d. total revenues on the good to rise if it is a normal good, but total revenues will fall if it is an inferior good. 7. If the quantity demanded of a product falls from 600 to 500 when the consumer income rises from $10,000 to $11,000, the good has an income elasticity equal to: a. -.524. *b. -1.91. c. .524 d. 1.91 8. For a normal good, the sign of its income elasticity: *a. will always be positive. b. will always be negative. c. will be positive if demand is elastic. d. will be negative if demand is inelastic.
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9. Assume that the price elasticity of a good is relatively elastic. Which of the following will be true for the good? a. -1 < E D < 0 b. E D < -1 c. As the price of the good rises, total revenues will fall d. As income rises, total revenues will fall *e. both b and c 10. Assume that at a $20 price, 900,000 units of a good are sold. The good has a price elasticity of -1.2. If the price were raised to $22, what would be the new quantity of units sold? *a. 792,000 b. 810,000 c. 990,000 d. 1,008,000 11. Assume that two goods have a cross price elasticity of 1.5. If the price of good 2 rises by 2%, the quantity of good 1 will: a. increase by .75%. *b. increase by 3%.
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This note was uploaded on 04/17/2008 for the course ECO 201 taught by Professor Mikeadkins during the Spring '08 term at KCTCS.

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Exam2Solution - Exam 2 Solution 1. A horizontal demand...

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