Ex2AS10 to Post

# Ex2AS10 to Post - ECONOMICS 202 EXAM 2A SPRING 2010 1 Some...

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ECONOMICS 202 – EXAM 2A – SPRING 2010 1. Some folks argue that if insurance companies would reduce their premiums (prices), their total revenue would rise. If they are correct, then between the current and lower premiums (prices): a. |E D | < 1; b. |E D | = 1; c. |E D | > 1; d. E Y < 1; e. a and d. 2. Market studies reveal that intracity bus service is an inferior good. Which of the following ratios would have been used to arrive at this conclusion? a. % Î D / % Î Y; b. % Î QD / % Î P; c. % Î QS / % Î P d. % Î D Y / % Î P X ; e. none above. 3. Assume twins Adam and Karl are identical in every respect except Adam spends 20 percent of his budget on gasoline while Karl spends 30 percent on gasoline. Considering only this information we expect that Adam’s |Ed| for gasoline is less than Karl’s. 4. Assume the market for grapefruit is in equilibrium. Now a severe freeze dramatically reduces the supply of grapefruit. According to the 2 nd Law of Demand, we expect the change in equilibrium price to be greater in the short-run than in the long-run, and we expect the change in the equilibrium quantity to be greater in the short-run than in the long-run. 5. If market studies reveal the cross-price elasticity of demand for goods R and K is > 0, we conclude that R and K are: a. substitutes in production; b. substitutes in consumption; c. complements in production; d. complements in consumption. 6 . Assume E S = 4. If Price increased by 10 percent, c.p., then Q must have: a. risen by 4%; b. fallen by 40%; c. risen by 40%; d. fallen by 10%; e. none above 7. No matter what the price of ice cream is, Annabel always spends \$10 per week on ice cream. Therefore, her income elasticity of demand is: a. > 1; b. < 1; c. = 1; d. = 0; e. none above. 8. When studying Consumer Choice it is assumed that the objective of the consumer is to maximize ____ subject to the constraint of his/her budget: a. Marginal Utility; b. Marginal Utility per dollar; c. Total Revenue; d. Profits; e. none above.

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Ex2AS10 to Post - ECONOMICS 202 EXAM 2A SPRING 2010 1 Some...

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