Econ302-hw2-spring11-solution - 1 E con302 H o me wo r k A...

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1 E c on302 Hom e work A ss ignm e nt 2 Solution s PART I: Multiple Choice Questions 1. For which of the following goods is the market most restricted geographically? a. retail gasoline. b . hou s ing c. gold. d. beef. 2.Which of the following is a positive statement? a. the President of the United States ought to be elected by a direct vote of the American people rather than the Electoral College. b. because many adults cannot afford to go to college, tax credits for tuition should be introduced. c a fundam e n t al a ss ump ion of h ec onomi ory of on um r b havior i ha r alway pr f r having mor of any good o having l of i d. all of the above. e. none of the above. 3. If the actual price were below the equilibrium price in the market for bread, a a. surplus would develop and get worse. hor ag would d v lop and mark for ce would nd o orr probl m c. surplus would develop, but market forces would tend to correct the problem. d. shortage would develop and market forces would tend to make it worse. 4. From 1970 to 1993, the real price of college education increased and total enrollment increased. Which of the following would cause an unambiguous increase in the real price of college education? a. a shift to the right in the supply curve for college education and a shift to the right in the demand curve for college education. b. a shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education. a hif o l in upply urv for oll g du a ion and a righ d mand ion d. a shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education. 5. Which of the following would shift the demand curve for new textbooks to the right? a. a fall in the price of papers used in publishing texts. b. a fall in the price of equivalent used textbooks. an in popula st ud ts d. a fall in the price of new textbooks.
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2 6. Which of the following represents the price elasticity of demand? a. ( Q/P) / ( P/Q) b. ( Q/P) + ( P/Q) c. ( Q/P) - ( P/Q) d . ( Q / P) * (P Q) 7. Along any downward sloping straight-line demand curve: a t h e pri ce la st i c y vari s , bu lop on an b. both the price elasticity and slope vary. c. the slope varies, but the price elasticity is constant. d. none of the above is necessarily true. 8. If the price elasticity of demand for gasoline is estimated to by -0.20 in the short run, which is the most likely value of the long-run elasticity? a. -0.10 b -0 30 c. -0.20 d. - e. none of the above the elasticity of demand in the long run is always positive. Figur e 1 9. Refer to Figure 1. Assume the section of the demand curve labeled A corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10, a. quantity demanded changes proportionately less than the price.
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This note was uploaded on 05/25/2011 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ302-hw2-spring11-solution - 1 E con302 H o me wo r k A...

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