Econ002McleodExam 2 Sample 1 with Key

Econ002McleodExam 2 Sample 1 with Key - Econ 002 FORM A...

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Econ 002 Test 2 McLeod FORM A 1. If the income elasticity of demand for cereal is -.25 and the income elasticity of demand for peaches is 1.5 then A) cereal and peaches are substitutes. B) cereal and peaches are complements. C) cereal is a normal good and peaches are an inferior good. D) cereal is an inferior good and peaches are a normal good. 2. Suppose you produce tie-dyed t-shirts. You notice that when you charge $10 per shirt, you sell 200 shirts. Also, when you raise the price to $12, you sell 150 shirts. As the price goes up from $10 to $12, your total revenue __________, therefore the demand for tie-dyed t-shirts must be 3. Suppose a firm doubles all of its inputs and this results in the firm tripling its output. The firm is experiencing 4. If the price elasticity of demand for a good is -1.5, then a 5% decrease in the price of the good will cause a 5. If demand for a good is perfectly inelastic, then the demand curve will be A) a horizontal line. B) a vertical line. C) a straight line with a constant negative slope. D) flatter and flatter as the price of the good falls.
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