# test2 - 1 Practice Test 2 Spring 07(49 Questions Name...

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Unformatted text preview: 1 Practice Test 2, Spring 07 (49 Questions) Name: ______________________________ Instructions : this practice exam is just what its title says it is: a practice version of the exam. It is designed to give you a feeling for the format and style of the exam questions, the average degree of difficulty of the questions, and the range of topics covered by the questions. While looking over this practice exam is likely to be helpful in preparing you for the exam, you should not think of looking over this practice exam as any kind of effective substitute for studying for the actual exam by reviewing your readings, lecture notes, assignments, quizzes or other course materials. Note that hints are for practice purposes and they will not provided with the exam questions. ____ 1. Consider airfares on flights between New York and Minneapolis. When the airfare is \$250, the quantity demanded of tickets is 2,000 per week. When the airfare is \$280, the quantity demanded of tickets is 1,700 per week. Using the midpoint method, (Hint: organize the information using the schedule below and do the calculations) P1 = Q1 = TR1 = P2 = Q2 = E = TR2 = a. the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease. b. the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to increase. c. the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to decrease. d. the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to increase. ____ 2. Total revenue a. always increases as price increases. b. increases as price increases, as long as demand is elastic. c. decreases as price increases, as long as demand is inelastic. d. remains unchanged as price increases when demand is unit elastic. ____ 3. In which of the following situations will total revenue increase? a. Price elasticity of demand is 1.2 and the price of the good decreases. b. Price elasticity of demand is 0.5 and the price of the good increases. c. Price elasticity of demand is 3.0 and the price of the good decreases. d. All of the above are correct. ____ 4. If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by a. 1.05% and tuna sellers' total revenue will increase as a result. b. 1.05% and tuna sellers' total revenue will decrease as a result. c. 2.14% and tuna sellers' total revenue will increase as a result. d. 2.14% and tuna sellers' total revenue will decrease as a result. 2 Figure 3-5-1 A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price....
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test2 - 1 Practice Test 2 Spring 07(49 Questions Name...

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