1. The demand function is described by the equationq(p) = 130 p/5. The inverse demand function is described by the equation

a. p(q) = 650 5q.

b. p(q) = 1/130 q/5.

c. q(p) = 130 5p.

d. q(p) = 1/(130 p/5).

e. p(q) = 130 q/5.

2. If the demand function for tickets to a play isq = 3,800 95p, at what price will total revenue be maximized?

a. $80

b. $40

c. $20

d. $10

e. none of the above.

3. In Ozone, California, people all have the same tastes and they all like hot tubs. Nobody wants more than one hot tub but a person with wealth $W will be willing to pay up to $.01W for a hot tub. The number of people with a wealth greater than $W for any givenW in Ozone is approximately 1,000,000/W. The price elasticity of demand for hot tubs in Ozone, California, is

a. 0.1.

b. 0.01.

c. 1.

d. 0.4.

e. none of the above.

4. At the price of $100, tourists demand 267 airplane tickets. At the same price, business travelers demand 237. At the price $110, tourists demand 127 tickets and business travelers demand 127. Assuming that the demand curves of business travelers and tourists are both linear over this price range, what is the price elasticity of demand at the price $100?

a. 4.96

b. 25

c. 5.46

d. 0.05

e. none of the above.

5. The inverse demand function for grapes is described by the equationp = 518 5q, wherep is the price in dollars per crate andq is the number of crates of grapes demanded per week. Whenp = $38 per crate, what is the price elasticity of demand for grapes?

a. 190/96

b. 5/518

c. 5/96

d. 96/38

e. 38/480

6. If the marginal cost of brewing beer is 40 cents and the profit-maximizing price is 90 cents, then the price elasticity of demand is

a. 2.

b. 1.8.

c. 2.33.

d. 0.66.

e. 3.

7. The demand for pickles is given byp = 167 3q and the supply is given byp = 5 + 6q. What is the equilibrium quantity?

a. 15

b. 23

c. 113

d. 18

e. None of the above.

8. The inverse demand function for lemons is defined by the equationp = 120 11q, whereq is the number of crates that are sold. The inverse supply function is defined byp = 8 + 3q. In the past there was no tax on lemons but now a tax of $84 per crate has been imposed. What are the quantities produced before and after the tax was imposed?

a. 4 crates before and 3 crates after

b. 8 crates before and 2 crates after

c. 16 crates before and 5 crates after

d. 16 crates before and 5 crates after

e. None of the above.

9. The inverse demand function for cases of whiskey defined byp = 160 6q, and the inverse supply function is defined byp = 61 + 3q. Originally there was no tax on whiskey. Then the government began to tax suppliers of whiskey $27 for every case they sold. How much did the price paid by consumers rise when the new equilibrium was reached?

a. It rose by $27.

b. It rose by $29.

c. It rose by $18.

d. It rose by $16.

e. None of the above.

10. The demand function for orange juice isq = 269 9pand the supply function isq = 9 + 4p, whereq is the number of units sold per year andp is the price per unit, expressed in dollars. The government decides to support the price of orange juice at a price floor of $24 per unit by buying orange juice and destroying all that it has purchased. How many units must the government destroy per year?

a. 52

b. 56

c. 25

d. 61

e. 57

11. The demand curve for rutabagas is a straight line with slope 23 and the supply curve is a straight line with slope 2. Suppose that a new tax of $3 per sack of rutabagas is introduced.

a. The total number of rutabagas purchased increases.

b. The price paid by demanders rises by the same amount as the price received by suppliers falls.

c. The price received by suppliers falls by more than the price paid by demanders rises.

d. The price paid by demanders rises by more than the price received by suppliers falls.

e. The price paid by demanders rises by more than $3.

12. The price elasticity of demand for a certain agricultural product is constant (over the relevant range of prices) and equal to 2. The supply elasticity for this product is constant and equal to 3. Originally the equilibrium price of this good was $45 per unit. Then it was discovered that consumption of this product was unhealthy. The quantity that would be demanded at any price fell by 100%. The percent change in the long-run equilibrium consumption of this good was

a. 100%.

b. 64%.

c. 20%.

d. 60%.

e. There is not enough information to determine the answer.

13. Daily demand for gasoline at Billy-Bob's Mobile Station is described byQ = 776 200p, whereQ are gallons of gasoline sold and p is the price in dollars. Billy-Bob's supply isQ = 2890 + 1,500p. Suppose the state government places a tax of 20 cents on every gallon of gasoline sold. What is the deadweight loss resulting from this tax?

a. 3.53 dollars

b. 3.11 dollars

c. 0.42 dollars

d. 96.12 dollars

e. 34.59 dollars

14. Which of the following production functions exhibit constant returns to scale? In each case y is output andK andL are inputs. (1)y =K^1/2L^1/3. (2) y = 3K^1/2L^1/2. (3)y =K^1/2 +L^1/2. (4)y = 2K + 3L.

a. 1, 2, and 4

b. 2, 3, and 4

c. 1, 3, and 4

d. 2 and 3

e. 2 and 4

15. A firm has the production functionf(x,y) = 20x^3/5y^2/5. The slope of the firm's isoquant at the point (x,y) = (20, 40) is (pick the closest one)

a. 3.

b. 0.67.

c. 1.50.

d. 0.50.

e. 0.25.

16. A firm has the production functionf(X,Y) =X^3/4Y^1/4, whereX is the amount of factorx used andY is the amount of factory used. On a diagram we putX on the horizontal axis andY on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of 9. The straight line we drew

a. is a ray through the origin with slope 3.

b. is a ray through the origin with slope 4.

c. is vertical.

d. is horizontal.

e. has a negative slope.

17. The production function is given byF(L) = 6L^2/3. Suppose that the cost per unit of labor is $8 and the price of output is 4, how many units of labor will the firm hire?

a. 16

b. 8

c. 4

d. 24

e. None of the above.

18. the production function is given byf(x) = 4x^1/2. If the price of the commodity produced is $100 per unit and the cost of the input is $15 per unit, how much profit will the firm make if it maximize profits?

a. $2,666.67

b. $1,331.33

c. $5,337.33

d. $2,651.67

e. $1,336.33

19. In Problem 9, when Farmer Hoglund appliesN pounds of fertilizer per acre, the marginal product of fertilizer is 1 N/200 bushels of corn. If the price of corn is $1 per bushel and the price of fertilizer is $.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits?

a. 320

b. 328

c. 160

d. 84

e. 200

20. The production function isf(x₁,x₂) =x^1/2₁x^1/2₂. If the price of factor 1 is $14 and the price of factor 2 is $7, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

a. x₁ = 0.50x₂.

b. x₁ =x₂.

c. We can't tell without knowing the price of output.

d. x₁ = 2x₂.

e. x₁ = 7x₂.