1. Coca Cola just conducted a $7 million ad campaign. In order to page the effectiveness of the campaign, Coca-Cola's economists calculated the cross price elasticity of demand between Coke and Pepsi. Which of the following combinations would indicate that the campaign was successful: a. From 0.8 to 0.5. b. From 0.8 to 1.5. c. From -0.6 to 0.2. d. From -0.9 to -1.4. 2. If the price elasticity of demand of Hot Wheel cars equals 3.85 and the percent change in price is 7 percent, then the quantity demanded of windup toys will be a. 12 percent. b. 27 percent c. 16 percent d. 19 percent. 3. Two economists from Harvard were studying the demand for gasoline in Indonesia. They observed that a 10 percent increase in the price of gas reduced the quantity demanded of gas by 2.2 percent and that a 10 percent increase in the price of electricity increased the demand for sasoline by 1.6 percent. This indicates that (i) the demand for gasoline is price inelastic and (ii) gasoline and electricity are substitutes. Which of these two statements is correct? a. i and ii b. i not ii c. ii noti d. neither i norii 4. Suppose you are eating buffalo wings at a local happy hour. The total utils from eating the fourth, fifth, sixth, and seventh wings are: 70, 113, 126, and 150 respectively. What is the marginal utility of the sixth wing? a. 24 b. 126 c. 13 d. 56 5. Suppose you just finished your fourth plateful of hamburgers and potato salad at the Fourth of July picnic and it yielded zero units of additional satisfaction. Should you go back for more? a. If the fourth plate yields zero units, than to consume a fifth cannot give you any less than zero. b. You should not because you could get negative utility from the fifth plate. c. It will not make a difference because your total utility is at its highest point. d. If you received zero satisfaction from the fourth plate, then the law of diminishing marginal utility is not working in this situation. 6. If the price elasticity of demand for a steak is 14, this means that a. the percentage change in quantity demanded is 14 times the percentage change in price. b. if quantity demanded fell by 1 percent, price would fall by 104 percent. c. if price was raised 10 percent, quantity demanded would fall by 14 percent. d. if price was raised 10 percent, quantity demanded would rise 14 percent. e. none of the above 7. Suppose at a price of $6 and at a price of $10, Jon Snow purchases 30 units of Coca-Cola. Given this information, we know that a. Jon's entire demand curve for Coca-Cola is perfectly elastic. b. Jon's entire demand curve for Coca-Cola is inelastic. c. Jon's demand for Coca-Cola is perfectly inelastic between the prices of S6 and $10. d. Jon's demand for Coca-Cola is perfectly elastic between the prices of $6 and $10. e. Jon's entire demand curve for Coca-Cola is unit elastic. 8. Suppose that the price of digital clocks falls from $14 to $12, its quantity demanded rises from 1,400 1,600 units. The price elasticity of demand for this good is a 1.15. b. 0.13. c. 1.39. d. 0.20 e. 0.87 9. Sheldon is currently consuming 2 Cokes and 5 slices of pizza per week such that the marginal utility of the third Coke is 10 utils and that of the fourth slice of pizza is also 10 utils. How should Sheldon redirect his purchases so as to attain consumer equilibrium? a. He should buy more pizza slices and less Coke. b. He should buy fewer pizza slices and more Coke. c. He is currently at consumer equilibrium and should keep his purchases the same. d. He could gain more satisfaction by buying less of both and more of something else. e. There is not enough information to answer the question. 10. Suppose the marginal utility (MU) of a decorative candle is 80 utils and each costs $10 while the MU of a flashlight is 25 utils and each costs $5. If you consume one candle and one flashlight per week, are you attaining consumer equilibrium? a. You are in consumer equilbrium, so there is no need to change. b. You need to buy more candles and fewer flashlights to be in equilibrium c. You need to buy more flashlights and fewer candles to be in equilibrium d. There is not enough information to answer the question. 11. If Leonard bought 20 comics last year when his income was $40,000 and he buys 24 comics this year when his income is $45,000, then his income elasticity of demand is _which means that comics are an) good for Leonard a. +0.33; normal b. -1.69; inferior c. +3.0; normal d. +0.59; inferior e.-0.33; inferior 12. Suppose Hamilton decides that if the price of their blenders is $32, the quantity demanded will be 1,000 units, and if the price is $35, the quantity demanded will be 800. The price elasticity of demand for the good is approximately a. +0.41. b.-0.44. c. +0.34. d. -0.34 c. +2.44 13. When the price of the Amazon Firestick rises from $50 to $55, quantity demanded falls from 8,200 to 7,500. The price elasticity of demand here is _making the demand for this good in the price range between $50 and $55. a. 1.94; inelastic b. 0.94 inelastic c. 1.06, elastic d. 0.84; clastic c. 0.94; elastic 14. A recent study on enrollment at a Southwestern College concluded that demand elasticity is 0.88. The administration is considering a tuition increase to help balance the budget. The best decision to raise revenue is to a decrease tuition, which should cause a rise in enrollment enough to balance the budget. b. decrease tuition, which would bring in more revenue to the college. c. leave tuition "as is" because an increase would not help balance the budget anyway d. increase tuition, which would bring in more revenue. 15. When price $12, quantity demanded - 1,200. When price $14, quantity demanded = 1,025. When the firm lowered price from $14 to $12, it discovered that demand is and total revenue a elastic; increased; $14,400 b. elastic, decreased; S14,400 c. inelastic, increased; 550 d. elastic; increased; S50 e. inelastic, decreased; S3,150 Exhibit 2 Apples Units Total Utility 0 0 15 2 26 3 36 Units 0 Pears Total Utility 0 21 59 4 16. Refer to Exhibit 2. Penny spends $5 a week on apples and pears. If the price of both goods is $1 per unit, how many apples and pears, respectively, does she purchase per week if she wants to maximize her utility? a. 0 and 5 b. 1 and 4 c. 2 and 3 d. 3 and 2 c. none of the above 17. Refer to Exhibit 2. Penny spends $5 a week on apples and pears. If the price of both goods is $1 per unit, what is Penny's total utility from consuming the optimal bundle of goods? 2.85 b. 86 c. 88 d. 209 c. 279 18. Refer to Exhibit 2. Assume that the price of pears increases to $2, while the price of apples remains at S1, and Penny allocates $5 of the weekly food budget to purchasing apples and oranges. If Penny wants to maximize her utility, her new consumption bundle will consist of a. 1 apple and 2 pears. b. 3 apples and 2 pears. c. 5 apples and no pears. d. none of the above 19. Which of the following will tend to occur when a price floor is imposed on com? a. persistent surpluses b. problems of disposal of goods c. disguised discounts that are designed to eliminate excess production d.overinvestment in the industry e. All of the above are correct. 20. In 1989, Hurricane Hugo devastated Charleston, South Carolina, leaving residents with no electricity for light or refrigeration, and completely cut off from the outside world by fallen trees and washed out roads. Consequently, the price of ice rose 1,000 percent and generators 300 percent. Tree removal firms were charging $4,000 to cut up a single tree. Outraged, the city government enacted an emergency law prohibiting price "gouging." This law is an example of a. The cost of disaster services. b. A price ceiling. c. Increasing opportunity cost d. A price floor 21. If both the supply and demand curves shift to the left, then we can conclude that there will be a. an increase in the equilibrium quantity sold. b. a decrease in the equilibrium quantity sold. c. an increase in the equilibrium price. d. a decrease in the equilibrium price. Figure 3 X X X X Q Cocaine Q Cocaine 22. The US government has because of the ineffectiveness and growing costs of the war on drugs decided to "decriminalization of the sale of cocains. Critics believe that this will expand drug because this will remove the stigma and danger from arrest associated with cocaine usage. Which graph in Figure 3 best illustrates the critics' case? a. 1 - Supply and Demand shift right b.2- Supply shifts right c. 3 - Supply shifts right and Demand shifts ? d. 4-Demand shifts right 23. Which of the following is a symptom of a price floor? scalping of Petco Park tickets b. surplus eggs c. the San Francisco city housing shortage d. black markets e. milk shortages Figure 2 Silverware O Silverwar QSilverware (1) 24. The silverware industry has been in a decline since the late 1970s. Families often eat takeout in front of the television on paper plates with plastic forks and so people purchase less silverware. Also, in 2002- 2007, the price of silver increased from $18 to $27 per Ounce. Which graph in Figure 2 best illustrates these developments? a 1 c. 3 d. 4 Exhibit 1 Howard Wolowitz is faced with choosing between $2 hamburgers and$ 1 milkshakes for lunch. The following charts show the marginal utility derived from each of the two goods: Marginal Utility of Hamburgers in Utils Quantity of Hamburgers Consumed Each Week 10 Marginal Utility of Milkshakes in Utils Quantity of Milkshakes Consumed Each Week 25. Refer to Exhibit 1. How many hamburgers and milkshakes will Howard consume each if the has $11 to spend? a. 5 hamburgers and I milkshake b. 1 hamburger and 5 milkshakes c. 4 hamburgers and 3 milkshakes d. 3 hamburgers and 4 milkshake