ISU ECON 101 - Econ101Exam2-1-S11 (6 pages)

Unformatted text preview:

Econ 101 Sections 3 and 4 S11 Schroeter Exam 2 Special code 0001 Choose the single best answer for each question Do all of your scratch work in the side and bottom margins of pages 1 If the demand for a good is elastic then an X increase in the price of the good will result in a no change in the quantity demanded b a decrease in the quantity demanded of X c a decrease in the quantity demanded of less than X a decrease in the quantity demanded of more than X 2 The cross price elasticity of demand for good A with respect to the price of good B is positive This means that goods A and B are a both normal goods b both inferior goods substitutes d complements 3 In the competitive market for a certain good demand is inelastic Then supply decreases As a result the absolute value of the percentage change in equilibrium price will be greater than the absolute value of the percentage change in equilibrium quantity b equal to the absolute value of the percentage change in equilibrium quantity c less than the absolute value of the percentage change in equilibrium quantity d Impossible to determine without more information You would have to know the elasticity of supply 4 Consider airfares on roundtrip flights between New York and Des Moines When the airfare is 310 the number of tickets demanded is 1000 per week When the airfare is 340 the number of tickets demanded is 920 per week Over this range of airfares the elasticity of demand calculated by the midpoint method for roundtrip flights between New York and Des Moines is a 0 83 0 90 c 1 11 d 1 21 2 5 Suppose that a seller is able to charge different prices to two separate groups of customers One group of customers has elastic demand and the other group has inelastic demand for her product Which of the following would result in the greatest increase in her sales revenue a increasing the price she charges to the customers with elastic demand and decreasing the price she charges to the customers with inelastic demand increasing the price she charges to the customers with inelastic demand and decreasing the price she charges to the customers with elastic demand c increasing the price she charges to both groups of customers d decreasing the price she charges to both groups of customers 6 In the competitive market for widgets supply is more elastic in the long run than in the short run however demand has roughly equal elasticities in the long run and in the shortrun What would be the effect of a permanent decrease in demand a Equilibrium price decreases in the short run and decreases further in the long run Equilibrium quantity decreases in the short run and decreases further in the long run c Equilibrium quantity decreases in the short run and then returns part of the way toward