ISU ECON 101 - Econ101Exam2-Red-S16-key_Questions (6 pages)

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Econ 101 Section 5 S16 Schroeter Exam 2 Red Choose the single best answer for each question Do all of your scratch work on the exam 1 If the own price elasticity of demand for a good is 0 8 then which of the following events is consistent with a 4 decrease in the quantity demanded of the good a a 0 2 increase in the price of the good b a 3 2 increase in the price of the good c a 4 8 increase in the price of the good d a 5 increase in the price of the good 2 A good will tend to have more elastic demand a the greater the availability of close substitutes b the more broadly the good is defined c in the short run than in the long run d the more it is regarded as a necessity 3 If the income elasticity of demand for a good is positive it means that the good a has few substitutes b is a normal good c is an inferior good d is a necessity 4 Bill s Bagel Shop sells an average of 120 plain bagels per day when the price is 1 80 bagel A small increase in the price of flour leads Bill to increase his price for plain bagels to 2 00 bagel As a result his average daily sales of plain bagels decreases to 106 per day Over this range of prices the elasticity of demand calculated by the midpoint method for Bill s plain bagels is a 0 667 b 0 850 c 1 177 d 1 500 5 In the competitive market for widgets supply decreases and as a result equilibrium price increases by 10 and total expenditure on widgets increases by 4 Based on this information we can conclude that a the supply of widgets is elastic b the supply of widgets is inelastic c the demand for widgets is elastic d the demand for widgets is inelastic 1 6 The demand for gasoline is more elastic in the long run than in the short run The supply of gasoline has the same elasticities in the long run and the short run What would be the impact on the competitive market for gasoline if supply decreased and remained at the new lower level permanently a The equilibrium quantity of gasoline would decrease in the short run and decrease further in the long run b The equilibrium price of gasoline would increase in the short run and increase further in the long run c The equilibrium quantity of gasoline would decrease in the short run and return part of the way toward its original level in the long run d Both b and c 7 In the competitive market for wheat demand is inelastic The development of a new more productive hybrid wheat would a increase equilibrium price and increase the total revenue of wheat farmers b increase equilibrium price and decrease the total revenue of