T2sol - LAST/FAMILY NAME: STUDENT ID: FIRST NAME: Econ 1b03...

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LAST/FAMILY NAME: FIRST NAME: STUDENT ID: Page 1 Econ 1b03 Test 2, Solutions Instructions: Please print your name (last name, first name, middle initial) and student number in the space provided at the top of each page. The test consists of 25 multiple choice (MC) questions and 1 short answer question. There is a total of 15 marks on the test. You have 50 minutes to complete the test. Answer all questions. Only one answer is correct for the MC questions. Points are awarded if only the correct answer is circled. Answer the short answer question in the space provided below. No material, other than University approved calculators, is allowed. Multiple choice questions (1/2 marks each, total 12.5 marks): 1. The only producer of chocolate bunnies in the world, Choco's Bunny Company, recently expanded its production capacity from 1,000 bunnies per day to 2,000 per day. Supposing the price elasticity of demand for Bunnies is 3.33, if you use the midpoint method of estimating the price elasticity of demand, by how much will the company need to reduce its price to sell the additional 1,000 bunnies? A) 2.5% B) 25% C) 125% D) 20% 2. Jacquelyn is a student at Queen’s university. Which of the following is NOT an example of an explicit cost of her attending university? A) tuition B) textbooks C) the salary that she could have earned working full time D) computer lab fees
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LAST/FAMILY NAME: FIRST NAME: STUDENT ID: Page 2 3. Consider the market for milkshakes. An increase in the consumer surplus may result from: A) an increase in the demand for milkshakes. B) an increase in the supply of milkshakes. C) a decrease in the demand for milkshakes. D) none of the above. 4. The Cozy Chair Company believes it can sell 200 chairs at $200 per chair, or 300 chairs at $150 per chair. Using the midpoint formula, you can calculate that the price elasticity of demand (to the nearest tenth) for Cozy Chairs is: A) 2.5. B) 1.4. C) 0.7. D) 0.5. 5. In the short run: A) all inputs are fixed.
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This note was uploaded on 03/13/2011 for the course ECON 1B03 taught by Professor Hannahholmes during the Spring '08 term at McMaster University.

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T2sol - LAST/FAMILY NAME: STUDENT ID: FIRST NAME: Econ 1b03...

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