B. Multiple Choice. Read each statement carefully, and the choices that follow it. Select the choice

that best completes the statement or answers the question, and write the letter that precedes it

on the line that follows the question number.[N.B. - n.o.t.a. = "none of the above."]

6. Income elasticity of demand can determine whether a commodity is...

[a] technologically inferior to its competition [b] normal or inferior.[c] a luxury or a necessity.

[d] both a & b[e] both b & c.[e] n.o.t.a.

7. A commodity you consume more of as your Y rises is typically... [a] a necessity[b] obsolete

[c] undesirable[d] a luxury[e] none of the above

8. Alfred Marshall is considered... [a] the Father of Supply and Demand analysis. [b] responsible

for reversing the order of the dependent and independent variables on the x and y axes.

[c] the first economist to look into "Giffen goods."[d] all of the above.[e] n.o.t.a.

9. ____ Behavioral Economics... [a] is concerned with what are the hazards for those who misbehave

[b] questions whether people are really "rational decision makers."[c] deals with the

administration of punishment for children who misbehave.[d] all of the above.[e] n.o.t.a

10. P elasticity of d can tell us... [a] when to lower prices to increase TR.[b] when to increase

prices to increase TR.[c] both a & b.[d] when a good is either superior or inferior.[e] n.o.t.a.

Micro, TEST II - page 2. Name -

C. True or False. Read each statement carefully. If you decide that it speaks the truth,

place a clear "T" in the space preceding the statement. If not, put a clear "F" there.

11. ____ Perfectly-inelastic d-curves, as unusual as they are, lie at the heart of most economic theory.

12.P elasticity of supply can be determined by the slope of the s curve, just like p elasticity of d.

13.One of the advantages of utility theory is the lack of a unit of measurement.

14. ____ In 2006, two Ivy League professors claimed that they discovered Giffen goods in India.

15. A commodity that is perfectly p-elastic has a d curve that is perpendicular to the x-axis.

16.If the Xed coefficient of a good is > , we know that the goods are substitutes.

17.If the coefficient of p-elasticity of demand for a good is < 1, we say that it is rel. p-inelastic.

18.When economists simply speak of the "elasticity" of a good w/o a qualifier, they're referring

to the income elasticity of demand of that given good.

19.____All superior commodities belong to a category of products known as "Giffen goods."

20. ____ A price-elastic good is one whose d-curve has a "horizontal" slope

D. Fill-Ins. Complete each statement with the most appropriate term.

21. A p-elastic good is one whose d-curve has a very slope.

22-4. The 3 most common mistakes that homo economicus makes whenever deciding what course of

action to pursue:

(a) .

(b) .

(c) .

25. A commodity you consume more of as your Y rises is considered a .

E. Problem. Read the question and analyze the situation carefully, answering it in the space below it.

Identify which elasticity(-)ies is/are involved, show all work, & explain what your results signify.

Grocer Smith worried that a jump in the price of coffee as the result of a frost in Brazil was going

to hurt her bottom line. The p for a 16-oz can of "Chock full o' Beans" rose from $2 to $3, and as

expected, sales fell from 40 cans/week to 35. At the same time, sales of half-&-half also went

down, from 15 to 10 pints, even though its price remained the same! Using the appropriate

economic tools, analyze this scenario, and explain to Ms. Smith what happened, and why.

PLEASE HELP