econ002springexam2ans

# econ002springexam2ans - Name ECON 002 Spring 2008 Exam#2...

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Name ____________________________________________ ECON 002 Spring 2008 Exam #2 Please answer the multiple choice questions on the multiple choice answer sheet provided. Answer the problems in the space provided on the exam. Turn in the exam and the multiple choice answer sheet when you are finished. Feel free to write on the exam. Good Luck! Multiple Choice (Each Worth 3.6 points) 1. The Apple iPod is an MP3 player, which is a kind of portable audio device. The iPod is available in various different colors, including white. Which of the following product classifications is likely to have a demand curve with the highest price elasticity? A) White Apple iPods B) Apple iPods of any color C) MP3 players D) portable audio devices 2. Other things equal, the demand for a good tends to be more inelastic , the A) fewer the available substitutes. B) longer the time period considered. C) more the good is considered a luxury good. D) more narrowly defined is the market for the good. 3. A restaurant can sell 20 slices of pizza at a price of \$5 per slice and 30 slices at a price of \$3 per slice. Using the midpoint method, what is the price elasticity of demand? A) 0.40 B) 0.80 C) 1.25 D) 6.25 4. When a firm decreases the price of its product, which of the following is true? A) If demand is elastic, total revenue will decrease. B) If demand is unit elastic, total revenue will decrease. C) If demand is inelastic, total revenue will decrease. D) If demand is inelastic, total revenue will increase. 5. A firm increases the price of a product. The product has a price elasticity of demand equal to 0.3. What happens to the firm's total revenue? A) Total revenue is unchanged. B) Total revenue decreases. C) Total revenue increases. D) Total revenue becomes negative.

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6. Perfectly inelastic demand means that buyers A) are willing to buy any quantity of the good at a given price, but none at higher prices. B) will buy a huge, almost infinite amount more, if the price falls just a little. C) will buy the exact same quantity, regardless of the price. D) will buy a larger quantity if the price decreases. 7. Bob is a stay-at-home dad who does some telecommuting consulting work for extra cash. At \$50 per hour, he is willing to work for 6 hours a week. At \$60 per hour, he will do 8 hours of work. Using the midpoint method, what is his elasticity of supply? A) 4.33
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## This note was uploaded on 04/02/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Penn State.

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econ002springexam2ans - Name ECON 002 Spring 2008 Exam#2...

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