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323-Review for exam1

# 323-Review for exam1 - ECON 323(502 TEST A Spring 2011 Name...

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-1- ECON 323 (502) – TEST A Spring 2011 Name___________________________________ ID#_____________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following would cause a rightward shift in the demand curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline. A) I and II only B) I only C) II and III only D) II only E) I, II, and III 2) From 1970 to 1993, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment? 3) Which of the following represents the price elasticity of demand? 4) Which of the following statements about the diagram below is true? 5) Which of the following pairs of goods are most likely to have a negative cross price elasticity of demand? A) Rail tickets and plane tickets B) Coke and Pepsi C) Hotdogs and hotdog buns D) A Luciano Pavarotti compact disc and a Placido Domingo compact disc (Both Pavarotti and Domingo are opera stars.)

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-2- 6) 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: 7) Suppose that, at the market clearing price of natural gas, the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6. What will result from a price ceiling that is 10 percent below the market clearing price?
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