202Ex2AS09 for Old Exam File

202Ex2AS09 for Old Exam File - 1 ECONOMICS 202 EXAM 2A...

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1 ECONOMICS 202 – EXAM 2A – SPRING 2009 ANSWER THE NEXT 5 QUESTIONS WITH REFERENCE TO THE FOLLOWING INFORMATION ABOUT GOOD X: The market for good x is now in equilibrium and |E D | = 1.51 E Y = - 6.2; E XJ = 2.33; E XZ = 0.0; E S = 0.0 E Y = Income Elasticity of Demand; E XJ = Cross Price Elasticity of Demand between X and J; E XZ = Cross Price Elasticity of Demand between X and Z (You may find it helpful to draw the demand and supply diagram reflecting this information) 1. If sellers increase the price of X by 5 percent, c.p., the quantity sold will fall but total revenue will rise. 2. If income in the market for X were to decrease by 7 percent, c.p., total revenue would increase. 3. If the price of good J falls, c.p. the: a. Equilibrium price of X will fall b. Equilibrium quantity of X will not change c. Total Revenue from sale of X will fall. d. a - c are all correct. e. only a and c are correct. 4. If the price of good X rises, c.p., the demand for good Z will: a. rise; b. fall; c. not change; d. not enough info to know how the demand for Z will change. 5. If an excise tax is levied on the producer of X, the burden of this tax will fall 100% on the producer. 6. Firm Z changed its price from $7 to $9 and as a result the number of units sold changed from 5 to 3? Therefore, between $7 and $9 |Ed| = : (use midpoints formula) a. 0.20; b. 2.0; c. 0.5; d. 5.0; e. none above 7. If a firm's straight-line demand function is neither vertical nor horizontal and it seeks to maximize total revenue, it should charge the price where: a. |E D | = 1; b. |E D | > 1; c. |E D | < 1; d. |E D | = 0; e. |E S | = 1. 8. When McDonald’s raised the price of the Quarter Pounder by $0.50 its total revenue increased. This means the percentage change in the price was greater than the resulting percentage change in the quantity of Quarter Pounders sold. 9. Which of the following is not possible for a firm to do during the period we call the “short-run.” a. shut-down; b. vary output between zero and capacity; c. start a new business; d. go out of business; e. both c and d.
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This note was uploaded on 02/13/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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202Ex2AS09 for Old Exam File - 1 ECONOMICS 202 EXAM 2A...

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