Sample_Questions

# Sample_Questions - 2 1 Suppose demand for inkjet printers...

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1 PAM 2000, Spring 2009 Sample Questions for Prelim I I. True, False or Uncertain. Explain. 1) It is possible for Sue to be maximizing utility at a particular choice of bananas and pears, but for the marginal rate of substitution between bananas and pears to exceed the ratio of prices at those choice. 2) If a pest destroys Florida's fruit crop, then the supply of fruit will decrease, causing the equilibrium of fruit price to rise and the equilibrium quantity to fall. 3) The consumer’s optimal bundle (define), is likely to change if both her income and the prices of the goods she buys double. 4) The demand curve for a good will become less elastic the shorter the time period being considered. 5) It is possible for an indifference curve to have a positive slope. Problem Solving

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Unformatted text preview: 2 1) Suppose demand for inkjet printers is estimated to be Q = 1000 – 5 p + 10 p X – 2 p Z + 0.1 Y . If p = 80,, p X = 50, p Z = 150, and Y = 20,000; answer the following: a. What is the price elasticity of demand? b. What is the cross price elasticity with respect to commodity X ? Give an example of what commodity X might be. c. What is the cross price elasticity with respect to commodity Z ? Give an example of what commodity Z might be. d. What is the income elasticity? 2) Suppose a tax on coke of \$0.10 per can is levied on firms. As a result of the tax, the equilibrium price increases from \$1.20 to \$1.25. What fraction of the incidence falls on consumers? On firms? Suppose the supply elasticity is 0.6. What must the demand elasticity be?...
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