Midterm 1 Review

Midterm 1 Review - Midterm Review 1 (20 out of these 60...

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Midterm Review 1 (20 out of these 60 questions will be included in your Midterm Exam 1) Chapter 2 1) Along any downward sloping straight-line demand curve: A) both the price elasticity and slope vary. B) the price elasticity varies, but the slope is constant. C) the slope varies, but the price elasticity is constant. D) both the price elasticity and slope are constant. 2) Which of the following pairs of goods are most likely to have a negative cross price elasticity of demand? A) Hotdogs and hotdog buns B) Coke and Pepsi C) Rail tickets and plane tickets D) A Luciano Pavarotti compact disc and a Placido Domingo compact disc (Both Pavarotti and Domingo are opera stars.) 3) Consider the demand curve of the form Q = a - bP. If a is a positive real number, and b = 0, then demand is A) completely inelastic. B) inelastic, but not completely. C) unit elastic. D) elastic, but not infinitely. 4) A freeze in Florida's orange growing regions will: A) result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. B) result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. C) result in a sharp decrease in the price of oranges in the short run because demand is highly inelastic and supply is highly elastic. D) result in little change in the price of oranges in the short run because supply is infinitely elastic. 5) For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be: A) even more responsive. B) less responsive. C) equally responsive. D) none of the above
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6) For automobile demand in the U.S., the income response tends to be larger in the: A) short run. B) long run. C) The income response is the same in the long run and the short run. D) We do not have enough information to answer this question. 7) A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for c, we can use observed values for Q and I and then set the estimated income elasticity of demand equal to: A) c(I/Q) B) c(Q/I) C) -b(I/Q) D) Q/(cI) 8) A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for b, we can use observed values for Q and P and then set -b(P/Q) equal to the: A) income elasticity of demand. B) cross-price elasticity of demand. C) price elasticity of demand. D) price elasticity of supply.
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Midterm 1 Review - Midterm Review 1 (20 out of these 60...

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