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Unformatted text preview: BA 315: Test #2, Winter 08 Student Name:________________ Lundquist College of Business University of Oregon Favorite Food:______________ Ali Emami Please answer all questions and make sure to show your calculations or graphs for questions marked with (*). Correct answers without showing calculations and drawings do not receive any credit. You are allowed to use a calculator to help with the calculations on the test. Do not talk during the test or use someone else’s paper or calculator as assistance this can result in a zero and a failing grade in the class. Each question is worth 1 point. 1*. Suppose the price elasticity of demand for natural gas is -0.40. If the price of natural gas increases by 10 percent, then the quantity demanded of natural gas should, ceteris paribus: A) Decrease by 4 percent . B) Rise by 4 percent. C) Decrease by 2.5 percent. D) Rise by 2.5 percent. Facts: % 10%,% ? P Q ∆ = + ∆ = ε = -0.40, Formula and Calculation: ( 29 % % 0.4 % 0.4 10% 4% % Q Q P P ∆ ∆ = - ∆ = - + = - ∆ Answer = A ε = -0.40 = , 2*. If the tobacco lobby were successful in lowering the price of cigarettes by 20 percent, by what percentage would the quantity demanded change? Assume a price elasticity of demand of -0.50. A) Decrease by 50 percent. B) Decrease by 20 percent. C) Increase by 40 percent. D) Increase by 10 percent . Facts: % 20%, ,% ? P Q ∆ = - ∆ = ε = -0.50 Formula and Calculation: ( 29 % % 0.5 % 0.5 20% 10% % Q Q P P ∆ ∆ = - ∆ = -- = + ∆ Answer = D ε = -0.50 = , 3. A university's football games usually bring larger crowds than its stadium can seat. By which of the following means can the university reduce the size of the crowd and simultaneously earn more revenue to finance a new stadium? A) By raising ticket prices when demand for tickets is inelastic. B) By raising ticket prices when demand for tickets is elastic. C) By lowering ticket prices when demand for tickets is inelastic. D) By lowering ticket prices when demand for tickets is elastic. 4. When a firm advertises, it is attempting to: A) Increase the demand for its product. B) Increase the marginal utility consumers receive from the product. C) Decrease the price elasticity of demand for the product. D) All of the above. Table 1 - Demand schedule for automobiles The following is a hypothetical demand schedule for automobiles....
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This test prep was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at Oregon.
- Spring '08