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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 3. There are very few, if any, good substitutes for motor oil. Therefore, 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 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
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