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Midterm 2-Answer Key

Midterm 2-Answer Key - Midterm 2 Answer Key Part 1(Question...

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1 Midterm 2- Answer Key Part 1 (Question 1- Question 25, 3 points each, totally 75points) 1) The price elasticity of demand shows A) the relationship between market price and household income. B) the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. C) the quantity demanded at a given price. D) the change in the demand for one product in response to a change in the price of another product. 2) If the price elasticity of demand for good A is 1 (absolute value), then a 1% increase in 3) According to the above table, what is the absolute price elasticity of demand if price falls from $8.00 to $7.50?
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2 4) Refer to the above table. For which prices is demand elastic? 5) Over the inelastic range of a demand curve, there is A) a positive relationship between a given percentage change in price and a change in total revenues. B) a negative relationship between a given percentage change in price and a change in total revenues. C) an increase in total revenues regardless of an increase or decrease in price. D) no relationship between changes in price and changes in total revenues. 6) A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that
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3 7) Use the above figure. When the price increases from $2 to $10, total revenue
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