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Exam 2 Review-1 - New Exam 2 Review NOTE Questions 39 and...

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New Exam 2 Review NOTE: Questions 39 and 41 will not be covered on the exam. MULTIPLE CHOICE. Answers are shown at the end of the Exam. 1) Suppose that in a month the price of school bumper stickers increases from $1 to $1.50. If the price elasticity of demand (calculated using the initial value formula) is 0.1 and the initial quantity demanded was 200, the new quantity demanded is: A) 190. B) 50. C) 10. D) 150. 2) Buyers and sellers acting in their own best interest generate outcomes that are in society's best interest when all of the following are true except: 3) Government intervention in markets can increase market efficiency when: 4) In the case of perfectly elastic demand, the demand curve is: 5) Government regulated prices below the free market equilibrium are inefficient because: A) no one can be made better off without hurting someone by participating in another transaction. B) all mutually beneficial transactions happen. C) more goods could be produced using society's resources. D) they prevent mutually beneficial transactions. 6) If the government imposes a maximum price that is above the equilibrium price: 7) Suppose that the price of a box of pop tarts is $2 each. Michael is willing to pay $5 for the first box, Richard is willing to pay $4 for the second box, Jessica is willing to pay $3 for the third box, and Brooke is willing to pay $1 for the fourth box. In equilibrium, what is the total consumer surplus from the consumption of pop tarts? 8) On a linear demand curve, demand is ________ at small quantities than it is at the middle of the demand curve.
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