Answer the questions clearly. Make sure you solve all of them correctly with the right answer. No cursive please.
9:28 AM Mon Oct 12 + 20.2 +5I .)) 8. The elasticity of demand for a product is likely to be greater_. a When the number of substitutes products available is smaller. b When the proportion of one's income spent on the product is smaller. c If the product is a luxury rather than an absolute necessity. d If the product is an imported good rather than a domestically produced good. 9. Which of the following circumstances would cause a decrease in the price of a good? a. An increasing shift in the supply of a good and no shift in demand. b. A decreasing shift in the supply of a good and no shift in demand 0. An increasing shift in the demand for good and no shift in supply. d. An increasing shift in the demand for good and a decreasing shift in supply. 10. Certain kinds of tropical fruits are impossible to grow outdoors in the United States. Suppose, however, that to create jobs in Wyoming, the U.S. government offered extensive subsidies to growers to produce bananas. With the Subsidies, growers could build greenhouses and offer the fruit at world prices. The United States would then a. Have an absolute advantage in bananas b. Have a comparative advantage, but not be competitive c. Be competitive, but not have a comparative advantage. d. Have a comparative advantage and be competitive. 1]. Refer to the Table below. -IEeE_- I ecklaces 16 12 The table shows the output per week of two jewelers, Megan and Caitlyn. They can devote their time either to making bracelets or to making necklaces. What is Megan's opportunity cost of making a bracelet? a. 2 necklaces b. 1/2 of a necklaces c. 1/z of a bracelet d. 3A of a bracelet 12.The cross-price-elasticily of demand for coffee and tea is likely to be a Greater than zero b. Less than zero c cl .Zero. A mfimty 3 / 5 9228 AM Mon Oct 12 ?100%E} 6>+6 Q +5I True/False (2 Points each): 1. T/F The intersection of the supply and demand curves determines the market equilibrium. At the equilibrium price, the quantity demanded equals the quantity supplied. 2. _T/F An increase in supply causes a higher equilibrium price and higher equilibrium quantity. 3. _T/\"F Education can cause both the Supply and Demand curve to shift. 4. _T/F An inferior good, other things equal, an increase in income leads to a decrease in demand. 5. _T/F \"Thinking marginally\" has to do with comparing extra cost with extra benet. 6. _T/F The gains from specialization and trade are based on absolute advantage. 7. _T/F A normal good, other things equal, an increase in income leads to an increase in demand. 8. _T/F Income elasticity allows us to tell the difference between a normal and inferior good. 9. _T/F Microeconomics and Macroeconomics are closely intertwined. 10. _T/F If a market has a shortage, quantity demanded is greater than quantity supplied. Multiple Choice: (3 points each) 9:30 AM Mon Oct 12 100% 5 TODD of 1 O Problem: (24 points): Using the midpoint formula, calculate elasticity for each of the following changes in demand by a household. Is there a difference between elasticities? If so or not, explain your rationale... P1 P2 Q1 Q2 Cell Phone service $0.25/per min. $0.15/per min. 300 min/per month 400 min/per month b. Orange Juice $1.49/per Qt. $1.89/per Qt. 14Qt./ per month 12Qt./per month c. Big Macs $2.89 $1.00 3 per Week 6 per Week d. Cooked Salmon $9/per lb. $12/ per lb. 2lbs. per month 1.5lbs. per Month Bonus Points Question: The rent for housing in Los Angeles has been rising sharply. Demand of housing in Los Angeles has been rising sharply as well. This is hard to explain because the law of demand says that higher prices should lead to lower demand. Do you agree or disagree? Explain your
