midIIAS_302_f08

# midIIAS_302_f08 - Midterm II Version A December 4 2008...

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6) For a straight line demand curve, what is the price elasticity at the revenue maximizing point? A) Price elasticity is greater than -1. B) Price elasticity is less than -1. C) Price elasticity is equal to -1. D) Price elasticity is not defined. Sam spends \$6/wk on orange juice and apple juice. Orange juice costs \$2/cup while apple juice costs \$1 /cup. Sam views 1 cup of orange juice as a perfect substitute for 3 cups of apple juice. 7) What is Sam’s optimal consumption bundle of orange juice and apple juice? A) (0 apple juice, 3 orange juices) B) (6 apple juices, 0 orange juices) C) (2 apple juices, 2 orange juices) D) (4 apple juices, 1 orange juice) 8) Suppose in problem (7) the price of apple juice reduces to \$0.60/cup, while the price of orange juice remains constant. How many apple juice cups would Sam buy? A) 6 B) 2 C) 10 D) 0 Use the following information to answer questions 9, Suppose the inverse demand curve for calculators is P = 60 – 0.5 Q . 9)
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midIIAS_302_f08 - Midterm II Version A December 4 2008...

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