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E N G I N E E R I N G
E C O N O M Y
E C O N O M Y
Class Test #1 – Thursday, 16 February, 2006 – 90 minutes
PRINT your family name / initial and record your
student ID number in the spaces provided below.
FAMILY NAME / INITIAL
S O L
U
T I
O N
S
STUDENT ID #
This test consists of 17 multiple
This test consists of 17 multiple-choice
choice questions, and three problems requiring
questions, and three problems requiring
full solutions.
full solutions.
Multiple-choice questions are worth 4 points each.
There are no
penalties for incorrect answers.
The problems are worth a total of 32 points.
MULTIPLE-CHOICE QUESTIONS
Circle the correct answer on this test paper and
record it on the computer answer sheet.
Use the information below to answer questions 1 to 3.
The demand function for graphite pencils is given by [
Q = 5000 - 10 000 P
], in which Q is the
quantity demanded in units and P is the price per pencil in dollars.
The selling price is
$0.30/pencil.
1.
The elasticity at P=$0.30/pencil is:
A)
–1.5
B)
1.5
C)
– infinity
D)
+ infinity
E)
– 2.5
2.
The elasticity at P=0 is:
dQ/dP = -10 000
At P=0.30, Q = 5000 – 10 000 (0.30) = 2000
E
D
= - (-10 000) / (2000 / 0.30) = 1.5
dQ/dP = -10 000
At P=0, Q = 5000 – 10 000 (0.0) = 5000
E
D
= - (-10 000) / (5000 / 0) = 10 000 /
∞
= 0

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