Econ002McleodExam 2 Sample 1 with Key

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

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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 A) increases; elastic. B) increases; inelastic. C) decreases; elastic. D) decreases; inelastic. 3. Suppose a firm doubles all of its inputs and this results in the firm tripling its output. The firm is experiencing A) constant returns to scale B) economies of scale C) diseconomies of scale D) increasing marginal product 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 A) 7.5% increase in the quantity demanded. B) 7.5% decrease in the quantity demanded. C) 3.33% increase in the quantity demanded. D) 3.33% decrease in the quantity demanded. E) None of the above 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. 6. Ceteris paribus, the fewer substitutes there are for a good the more ________ the demand for the good, and the longer period of time people have to adjust to a price change, the more __________ the good. A) elastic; elastic
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This note was uploaded on 03/02/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Pennsylvania State University, University Park.

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

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