1) Suppose the market for grass seed can be expressed as

Demand: Q^D = 100 - 2p

Supply: Q^S = 3p

If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

2) The market demand for wheat is Q = 100 - 2p + 1 p_b + 2Y. If the price of wheat, p, is $2, and the price of barley, p_b, is $3, and income, Y, is $1000, the income elasticity of wheat is

A) 2 * (1000/2099).

B) 2.

C) 1/2 * (1000/2099).

D) cannot be calculated from the information provided.

3) The cross price elasticity of demand for a good is the percentage change in the quantity demanded in response to a given percentage change in

A) income.

B) the price of that good.

C) the price of another good.

D) the quantity demanded of another good.

4) A horizontal demand curve for a good could arise because consumers

A) are irrational.

B) are not sensitive to price changes.

C) view this good as identical to another good.

D) have no equivalent substitutes for this good.

5) If the price of orange juice rises 10%, and as a result the quantity demanded falls by 10%, then one can conclude that the demand for orange juice

A) is perfectly elastic.

B) is inelastic.

C) has a unitary elasticity.

D) has a constant elasticity.

6) Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the price elasticity of demand equals

A) -1.5.

B) -0.67.

C) -4.

D) -2.5.