1. If supply decreases and demand also decreases, we can conclude that the new equilibrium: 2. On the diagram for question two, circle the letter that correctly completes the following statement: Let Di and Si represent the original supply and demand curves. If there has been only an increase in demand, then the new equilibrium point will be 3. One of the following equations represents a supply curve and the other a demand curve. You have to decide which is which. Circle the answer for question three that is the closest to being correct. The equations are: Q =150 -10P Q=100 + 5.6P What quantity will suppliers willingly supply if the market price is forced to be $2 ? 4. Here is a function that is either a demand function or a supply function (but not both): Q =6 -5P A change occurs so that the following function now represents the situation: Q=2 -5P We can conclude that (circle the appropriate conclusion on the answer sheet). 5. Here is a demand function: Q =10 -5P . On the answer sheet circle your choice for its marginal revenue (MR) function. 6. Circle your choice for the quantity that will maximize total revenue for the function in 5 (above). 7. Suppose the price elasticity of demand for bread is 2.00. If the price of bread rises by 10%, the quantity demanded will decrease by: 8. Suppose that a 10% decrease in the price of good Y causes a 20% decrease in demand for good X. The coefficient of cross-price elasticity of demand is: 9. A price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units. The price elasticity of demand in this price range is: 10. The income elasticity of demand for a good is 0.5. If income increases by 5%, how much can demand be expected to increase? 11. Demand for X decreases from 100 to 50 when the price of Y decreases from $7 to $6. The cross-price elasticity of demand is:Circle the one best answer, fill in the blank(s), or work out completely. Show calculations, please. 1 a. Quantity must increase but market price may fall, stay the same or even increase. b. Price must fall but market quantity may fall, stay the same or even increase c. Price must increase but market quantity may fall, stay the same or even increase. d. Quantity must decrease but market price may fall, stay the same or even increase. e. Both market quantity and market price must increase. f. Market quantity must increase and market price must decrease. 2. Price M Quantity 3. 3.2 60.0 111.0 1180 130.0 150.0 (all close, but approximate) 4 a. demand has increased b. demand has decreased c. supply has increased d. supply has decreased e. quantity supplied has decreased f. quantity demanded has decreased g- quantity demanded has increased h. quantity supplied has increased 5. Circle the correct formula for marginal revenue (MR) a. MR=2-.4Q b. MR=3-.5Q e. MR =1-.167Q C. MR=1.5-.2Q d. MR=1-.333Q f. MR =1.5-.333Q 6. 1 3 4.5 5 6 7.5 7 a. 2 percent and total expenditures on bread will rise. b. 2 percent and total expenditures on bread will fall. c. 20 percent and total expenditures on bread will rise. d. 20 percent and total expenditures on bread will fall. e. 20 percent and total expenditures on bread will be unchanged. 8 a. negative and therefore these goods are inferior goods. b. negative and therefore these goods are complements. c. positive and therefore these goods are substitutes. d. positive and therefore these goods are normal goods. 9. 0.39 0.5 .89 1.0 1.75 2.83 10. 2.5% 8% 10% 15% 25% 40% 11. -3.67 -1.22 1.22 1.44 3.67 4.33