**Unformatted text preview: **______ and beef
and pork are ________:
a. -1.91; complements
b. -1.91; substitutes
c. -0.52; complements d. -0.52; substitutes
*e. None of the above
[Since pork and beef are substitutes the cross price elasticity should be positive]
12. A consumer doubles her expenditure on ice cream consumed when price increases by 25%. As a
result we can say that over this section of the demand curve, in absolute value terms own price
elasticity of demand for ice cream is:
*a. Greater than 1
b. Equal to 1
c. Less than 1 but greater than zero
d. Zero
e. More information is required to answer this question
[A 200% quantity increase caused by a 25% price increase is an elasticity of 8]
13. Consider the demand and supply curves for diesel: Qd= 700 –P, Qs=2p-200. At the competitive
equilibrium, total surplus (sum of producer and consumer) is equal to:
a. 40000
b. 80000
*c. 120000
d. 240000
e. None of the above
[The equilibrium is Q=400 and P=300. For information on how to calculate surplus see HGLO ]
14. Assume that the demand for Kellogg’s Corn Flakes is given by P=4 and the supply of Kellogg’s
Corn Flakes is given by P=2Q. In equilibrium:
*a. Demand is perfectly elastic and consumer surplus is equal to 0
b. Demand is perfectly inelastic and producer surplus is equal to 6
a. Supply is perfectly elastic and consumer surplus is equal to 16
b. Supply is perfectly inelastic and producer surplus is equal to 0
e. None of the above
[Perfectly elastic demand is a horizontal line]
15. For the supply curve p=25+4Q at a price of 65...

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