Midterm2_practice

Midterm2_practice - Midterm 2 Practice Problems Econ...

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Midterm 2 Practice Problems Econ 1101.01: Principles of Microeconomics Katherine Lande Schmeiser Problem 1 A. Neil owns a coffee shop and has calculated that by selling one more coffee, his total revenue will increase from \$1530 to \$1538, and his total costs will increase from \$830 to \$840. Given this, we know that Neil a. is maximizing profits at the current level of production. b. is not maximizing profits and should increase production. c. is not maximizing profits and should decrease production. d. is operating at a loss and should exit the industry. B. Which of the following would prevent an industry from being classified as perfectly competitive? a. each buyer purchases only a tiny fraction of the total market quantity. b. buyers perceive each product of different sellers to be different. c. it is easy for firms to enter and exit the market. d. there are many buyers and sellers. C. If a good has inelastic demand, this means that a 10% increase in the price will lead to a. more than a 10% decrease in the quantity demanded. b. less than a 10% decrease in the quantity demanded. c. less than a 10% increase in the quantity demanded. d. no change in the quantity demanded. D. You find that the Price Elasticity of Demand for TV’s is 2. This means that demand is a. elastic and a 1% increase in P causes a 2% decrease in Q d . b. inelastic and a 1% increase in P causes a 2% decrease in Q d . c. elastic and a 1% increase in Q d causes a 2% decrease in P. d. inelastic and a 1% increase in Q d causes a 2% decrease in P. E. Which of the following types of goods has the most inelastic demand? a. Necessities b. Luxuries c. Goods with many substitutes d. Goods whose price is high relative to consumer’s budgets F. If the cross-price elasticity of demand for goods A and B is a negative value, this means the two goods are: a. substitutes. b.

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This note was uploaded on 10/10/2011 for the course ECON 1101 taught by Professor Someguy during the Spring '07 term at Minnesota.

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Midterm2_practice - Midterm 2 Practice Problems Econ...

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