1. The following table has the demand schedules for shirts and milk. Show your work for each. (4 points) The The Demand for Demand for Shirts Milk Price Q. T. Revenues Price Q. T. Revenues Demanded Demanded 60 200 4.00 2000 50 240 3.50 3200 48 250 3.00 4000 40 300 2.00 8000 a) Calculate the Ed of shirts when the price changes from $60 to $50. Answer: b) Calculate the Ed of milk when the price changes from $4.00 to $3.50. Answer: c) Which of the two curves is relatively more elastic? Answer: d) If the price of shirts where to decrease by 10%, what would then occur? Answer: 2. Anna owns the Sweet Alps Chocolate store. She charges $10 per pound for her hand made chocolate. You, the economist, have calculated the elasticity of demand for chocolate in her town to be inelastic. If she wants to increase her total revenue, what advice will you give her and why? Explain your answers, and show your work. (1 point) Answer: b) Anna's total revenues (TR) are currently $1500 per day. What would she have done to her price if her TR were to become $1425 per day? How would you explain what3. Discount stores sell relatively elastic goods. Ceteris paribus, explain why selling at a relatively low price is profitable for them? (1 point) Answer: 4. Explain how a) negative externalities and b) lack of public goods can bring about market failure. (2 points) Answer: 5. Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is? Choose from A - D. Also B) explain your choice. (2 points) a. elastic b. inelastic c. unit elastic d. perfectly inelastic Answer: 6. Which of the following leads to the producers paying all of a tax? And B) explain your choice. (2 points) a. The supply is perfectly elastic b. The supply is perfectly inelastic c. The demand is unit elastic d. The demand is perfectly inelastic Answer: 7. When given the choice between altering the price of a product or its demand &/or supply, which is the better course of action? Explain your reply. (1 point) Answer: 8. Over time, the supply of a good or service does what? And B) explain your choice. (2 points) a. becomes more elastic. b. becomes less elastic. c. initially becomes more elastic and then becomes less elastic. d. initially becomes less elastic and then becomes more elastic. Answer:9. The the portion of your income spent on a good, the is your demand for the good. [1 point) a. larger: more income elastic. b. larger; more prioe elastic. c. smaller; more price elastic. d. smaller; more income elastic. 113. Which of the following factors will make the demand for a product more elastic? [Assume the product has a straightliner downward sloping demand. 1 point) a. The product has no close substitutes. b. A very small proportion of income is spent on the good. c. A long time period has elapsed since the product's price changed. d. A lower price. '1' 11. The demand curve in the figure above illustrates the demand for a product with: [1 point] a. zero price elasticity of demand at all prices. b. innite price elasticity of demand. c. unit price elasticity of demand at all prices. d. a price elasticity of demand that is different at all prices 12. In the figure below, the price elasticity of supply at any given quantity is highest along? And B] explain your choice. [2 poinE] a. 5? b. 59 c. Equal to zero on each of the three supply curves d. Equal to one on each of the three supply curyes Answer: Price S H S 24 20 - E G Sg 10 12 20 24 Quantity 13. In the figure above, the price elasticity of supply at any given quantity is lowest along? And B) explain your choice. (2 points) a. $7 b. 59 c. Equal to zero on each of the three supply curves d. Equal to one on each of the three supply curves Answer: 14. Suppose that a unit tax of $2 is imposed on producers and that the initial equilibrium price of the good is $10. With a vertical demand curve and an upward-sloping supply curve, we can predict that: (1 point) a. the price faced by consumers is 12 after the tax b. the price faced by consumers is 8 after the tax c. the price faced by consumers is 10 after the tax d. the price faced by consumers is 11 after the tax
