exam 2 pink - ECON 210 Exam #2 Fall 2010 1. As the price of...

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Econ 210 Page 1 of 9 Fall 2010 Exam 2 Pink ECON 210 Exam #2 Fall 2010 1. As the price of apples increased by 12%, the quantity demanded fell by 36%. This implies that the price elasticity of demand for apples is : a. 1/3 b. 3 c. 24 d. 48 2. The price of sugar increased from $2 per pound to $3 per pound. As a result, the quantity of sugar purchased fell from 80 pounds to 60 pounds. What is the price elasticity of demand? a. 5/7 = 0.71 b. 7/5 = 1.4 c. 20 d. 4 3. Suppose that as income of consumers increased by 10%, the quantity demanded for good X fell by 30%. This implies that good X is a(an) _____ good and the income elasticity of demand for good X is ______. (Assume all other factors other than income are held constant) a. Necessity; 1/3 b. Normal ;-1/ 3 c. Inferior; -3 d. Luxury; 3 4. Suppose the price of olive oil increased by 5% and as a result, the quantity of olive oil demanded fell by 3%. Which of the following would be true? a. Revenue decreased since the demand for olive oil is elastic. b. Revenue increased since the demand for olive oil is inelastic. c. Revenue decreased since quantity demanded decreased. d. Changes in revenue cannot be determined without information about the price elasticity of supply. 5. Which of the following would be an example of inelastic demand? a. Price elasticity of demand is equal to 5 b. Price elasticity of demand is equal to 1 c. Price elasticity of demand is equal to 0.5 d. Price elasticity of demand is equal to -3
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Econ 210 Page 2 of 9 Fall 2010 Exam 2 Pink 6. Which of the following explain(s) why supply is more elastic in the long run than in the short run? i. Inputs are more easily substituted in the long run. ii. Inputs are more likely to be fixed at a given level in the long run than they are in the short run. iii. The passage of time has no impact on a supplier’s response to price changes. a. only i b. i and ii only c. ii and iii only d. i, ii and iii 7. A tax wedge is… a. The total loss of economic surplus due to the imposition of a tax b. The distribution of who pays the burden of a tax c. The difference between the price a consumer pays and what a seller receives due to a tax d. The difference between income brackets related to a progressive income tax structure 8. The government institutes a new tax policy so that people who are making less than $20,000 pay 10% of their income to the government, people making in between $20,000.01 and $100,000 pay 17% of their income to the government, and people making more than $100,000.01 pay 24% of their income to the government. What type of tax system is this? a. A regressive tax b. A proportional tax c. A progressive tax d. A flat tax 9. Compare the market for canned soup and the market for used cars. The price of a can of soup is $2 a can and the price of a used car is $7,550 per used car. If each person in the economy makes $19,865, which of the following would best explain why the demand for canned soup is less elastic than the demand for used cars?
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This note was uploaded on 02/26/2012 for the course ECON 210 taught by Professor Staff during the Fall '08 term at Purdue University-West Lafayette.

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exam 2 pink - ECON 210 Exam #2 Fall 2010 1. As the price of...

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