QUESTION 1: For demand function P = 24 - 6Q

A. Demand is elastic at price 16

B. Demand is elastic at price 12

C. Demand is elastic at price 2

D. Demand has unitary elasticity at all points on the function

QUESTION 2: The income consumption curve

A. Always goes through the origin

B. Is always a straight line

C. Has income on the vertical axis

D. Is the same as the Engle curve

QUESTION 3: Comparing the income effects between salt and housing,

A. The income effect for salt will be greater

B. The income effect for housing will be greater

C. The two income effects will be about the same

D. The two income effects will be in the opposite direction

QUESTION 4: Suppose the price of public transportation increases. You know that the income effect of this increase is 5, the substitution effect is 10, but you do not know the signs. The total effect of the increase in the price on the change in quantity demanded of public transportation could be either:

A. 15 or 5

B. 5 or - 5

C. -15 or 15

D. -5 or -15

QUESTION 5: One aggregates individual demand curves by

A. Adding horizontally

B. Adding vertically

C. Adding horizontally and subtracting vertically

D. Adding vertical and subtracting horizontally

QUESTION 6: Price elasticity of demand is

A. The percentage change in quantity demanded divided by the percentage change in price

B. The change in price divided by the change in quantity

C. The change in quantity divided by the change in price

D. The percent change in price divided by the change in quantity

QUESTION 7: The formula for own price elasticity of demand is given by

A. (P/Q)(slope)

B. (Q/P)(slope)

C. [(Change in Q)/Q] / [(Change in P)/P]

D. (Q/P)(1/slope)

QUESTION 8: As one moves southeast on a downward sloping demand curve

A. Demand becomes more elastic

B. Demand becomes more inelastic

C. Elasticity stays the same

D. One cannot tell what happens to elasticity unless the demand curve is linear

QUESTION 9: If the demand for widgets is inelastic, revenues will ______ if the price of widgets increases.

A. Increase

B. Fall

C. Remain the same

D. One cannot tell what will happen to revenues without specific elasticity numbers

QUESTION 10: Your income rises from $1,000 a year to $10,000 and your purchases of beer increase from 10 to 20. Assume a linear relationship between income and quantity demanded. What number below most closely approximates your income elasticity at income equals $4,500?

A. 4

B. .33

C. 2.5

D. 1

QUESTION 11: The substitution effect of a price change can be measured

A. by moving (surfing) along a given indifference curve from one optimization point to the next.

B. by moving from one indifference curve to the next.

C. Can't tell without more information.

QUESTION 12: Assume convex indifference curves for a consumer buying the composite good, and hamburgers. If a hamburger is an inferior good, then we know that

A. The income effect and substitution effect reinforce each other.

B. The income effect and substitution effect work in opposite directions.

C. The income effect and substitution effects work in the same direction.

D. The income effect for an inferior good could be positive, or negative.

QUESTION 13: The market for Super Duper Skis has supply and demand curves given by P=4Qs - 2CL and P=12-2Qd +5I respectively. I=Income =$200, and CL=cost of labor = $10/hr. What quantity of Super Duper Skis at what price will be sold in equilibrium?

A. P=668, Q=172.

B. P=672, Q=172.

C. P=1032, Q=668.

QUESTION 14: Refer to Question 13. What is the own price elasticity of demand, at equilibrium?

A. 3.88

B. 1.94

C. 0.13

D. 7.77

QUESTION 15: If two goods are perfect complements

A. The indifference curves are L shaped, and there is no income effect.

B. The indifference curves are L shaped, and there is no substitution effect.

C. The indifference curves are linear, and negatively sloped

D. The indifference curves are linear, and positively sloped