EXAMII - PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER...

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PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER 2007-2008 Department of Economics Rochester Institute of Technology Examination # 2 100 points SOLUTIONS Instructor: Dr. Bríd Gleeson Hanna You have 1 hour and 50 minutes to complete the following 50 multiple-choice questions PLEASE REMEMBER TO PUT YOUR NAME ON YOUR SCANTRON. 1. For a good that is a luxury, demand a. tends to be inelastic. b. tends to be elastic. c. has unit elasticity. d. cannot be represented by a demand curve in the usual way. ANS: B 2. If a person only occasionally buys a cup of coffee, his demand for coffee is probably a. represented by a vertical or nearly-vertical demand curve. b. not easily represented by a demand schedule or demand curve. c. inelastic. d. elastic. ANS: D 3. There are very few, if any, good substitutes for motor oil. Therefore, a. the demand for motor oil would tend to be inelastic. b. the demand for motor oil would tend to be elastic. c. the demand for motor oil would tend to respond strongly to changes in prices of other goods. d. the supply of motor oil would tend to respond strongly to changes in people’s tastes for large cars relative to their tastes for small cars. ANS: A 4. Suppose the price of Twinkies decreases from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is a. 2.00. b. 1.55. c. 1.00. d. 0.64. ANS: D 5. 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, 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.
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ANS: A 6. When demand is perfectly inelastic, the demand curve will be a. negatively sloped, because buyers decrease their purchases when the price rises. b. vertical, because buyers purchase the same amount as before whenever the price rises or falls. c. positively sloped, because buyers respond by increasing the market quantity demanded of the good when price rises. d. positively sloped, because buyers respond by increasing their total expenditure on the good when price rises. ANS: B
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This note was uploaded on 10/26/2008 for the course ECON 0511-211 taught by Professor Gleeson during the Winter '08 term at RIT.

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EXAMII - PRINCIPLES OF MICROECONOMICS 0511-211 FALL QUARTER...

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