1. If supply decreases and demand also decreases, we can conclude that the newequilibrium:

a. Quantity must increase but market price may fall, stay the same or even increase.

1. Price must fall but market quantity may fall, stay the same or evenincrease.
2. Price must increase but market quantity may fall, stay the same or evenincrease.
3. Quantity must decrease but market price may fall, stay the same or evenincrease.
4. Both market quantity and market price mustincrease.
5. Market quantity must increase and market price mustdecrease.

1. On the diagram for question two, circle the letter that correctly completes the following statement: Let D₁ and S₁ represent the original supply and demand curves. If there has been only an increase in demand, then the new equilibrium pointwillbe ?

1. 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 equationsare:

Q=150-10P Q=100+5.6P

What quantity will suppliers willingly supply if the market price is forced to be $2 ?

60.0 111.0 118.0 130.0 150.0 (all close, butapproximate)

1. Here is a function that is either a demand function or a supply function (but notboth):

Q =6 -5P

A change occurs so that the following function now represents the situation:

Q =2 -5P

We can conclude that:

a. demand has increased

1. demand has decreased
2. supply has increased
3. supply has decreased
4. quantity supplied has decreased
5. quantity demanded has decreased
6. quantity demanded has increased
7. quantity supplied has increased

1. Here is a demandfunction:
   1. MR=2-.4Q

Q=10-5P. On the answer sheet circle your choice for its

marginal revenue (MR) function.

Circle the correct formula for marginal revenue(MR)

1. MR=3-.5Q

e.MR=1-.167Q

c.MR=1.5-.2Qd.MR=1-.333Qf.MR= 1.5- .333Q

1. Circle your choice for the quantity that will maximize total revenue for the function in 5(above).

1 3 4.5 5 6 7.5

1. Suppose the price elasticity of demand for bread is 2.00. If the price of bread rises by 10%, the quantity demanded will decreaseby:

a. 2 percent and total expenditures on bread will rise.

1. 2 percent and total expenditures on bread willfall.
2. 20 percent and total expenditures on bread willrise.
3. 20 percent and total expenditures on bread willfall.
4. 20 percent and total expenditures on bread will beunchanged

1. Suppose that a 10% decrease in the price of good Y causes a 20% decrease in demand forgood
   1. negative and therefore these goods arecomplements.

X. The coefficient of cross-price elasticity of demand is:

a. negative and therefore these goods are inferior goods.

1. positive and therefore these goods aresubstitutes.
2. positive and therefore these goods are normalgoods.

1. A price increase from $20 to $40 causes quantity demanded to decrease from 100 units to50 units. The price elasticity of demand in this price rangeis:

0.39

0.5

.89

1.0

1.75

2.83

1. The income elasticity of demand for a good is 0.5. If income increases by 5%, how much can demand be expected toincrease?

2.5%

8%

10%

15%

25%

40%

1. Demand for X decreases from 100 to 50 when the price of Y decreases from $7 to $6.The cross-price elasticity of demandis:

-3.67

-1.22

1.22

1.44

3.67

4.33

The multivariate demand function below will be needed for questions 12-18.

Setting:Grapple, Inc. is a leading seller of laptop personal computers. However, they want to become a leading tablet seller, too. Your marketing department, aided by your economics staff, has estimated a function to help you in the quest for market leader in tablets. The variables are defined after the function.

Qg=10000-25Pg+20Ph+30Pr-15Pdv-35Psc-10Pmm+0.05Ag+0.03A-25C+0.1Y

Q_g = the number of Grapple tablet computers demanded per week. P_g = the price of each new Grapple tablet (in $).

P_h = the price of each Hewpaq tablet (in $). P_r = the price of each Ronova tablet.

P_dv = the price to equip a tablet with Holographic digital video (in $, this is an upgrade option that enables three dimensional graphics on a tablet. Two dimensional graphics is standard equipment).

P_sc = the price of various screen sizes (in $, a 8 inch is standard, but upgrade options are 10 inch extra sharp, 12 inch, 12 inch extra sharp, Each also has a touch-screen option. The upgrades get progressively more expensive as the size and capability increases).

P_mm = the price of memory chip upgrades (in $). More 2 Gigabyte (Gb) chips can be added. Of course each added 2 Gb chip costs more. One 2 Gb chip is standard.

Y = average annual disposable income of a typical tablet purchaser (in $). A_g = average age of a tablet purchaser (in years).

A = average annual Grapple advertising expenditure (in $).

C = number of computer systems the average tablet purchaser already owns.

1. If all variables remain unchanged except the price of a Grapple tablet (P_g), which decreasesby

$50, then the quantity demanded of tablets will:

a. decrease by 1000

1. decrease by1250
2. increase by1000
3. increase by1250

1. If all variables remain unchanged except the price of Ronovo (P_r) tablets, which decreasesby

$50, then the demand for Grapple tablets will:

a. decrease by 750

1. decrease by1500
2. decrease by1750
3. increase by750
4. increase by1500
5. increase by1750

1. If all variables remain unchanged except the price of screen size and quality (P_sc), which decreases by $20, then the demand for Grapple tabletswill:

a. increases by 200

1. decreases by 200
2. increases by 450
3. decreases by 450
4. increases by700
5. decreases by700

1. You can tell by the sign preceding the price of Hewpaq tablets (P_h) that Grapple and Hewpaqs are:

a. normal goods

1. substitutegoods
2. inferiorgoods
3. complementarygoods

In the questions 16-18 use these values in the multivariate demand function for Grapple tablets:

P_g= $500 P_h= $600 P_r = $600 P_dv=$25 P_sc=$50 P_mm=$30 A_g = 40A = $100,000 C = 2Y=$30,000

1. After the values above are entered into your demand function, what quantity of Grappletablets will be demanded? Be very careful with this calculation. This value will be used again below.

19401 28902 31027 35902 38902 40152

1. What is the point income elasticity of demand for Grapple tablets at the above income level (Y)? Show the values you use in the formula and work out completely. Be sure to show the sign. Does this value indicate a very sensitive (elastic; responsive) relationship ? The formulais:

E=QgY

Y Qg

Work elasticity out in detail, give your calculations below. Next,one sentence comment addressing the questionasked.

1. What is the point advertising elasticity of Grapple tablets at the above level of advertising expenditures (A)? Show the values you use in the formula and work out completely. Be sure to show the sign. Does this value indicate a very sensitive (elastic; responsive) relationship ? The formulais:

E=QgA

A Qg

Work elasticity out in detail, give your calculations below. Next, a one sentence comment addressing the questionasked.

1. Write the first derivative of the following function in the space provided on the answersheet:

R=15-3T+ 4T²- 6T³

Write your derivative in the spacebelow:

1. Write the first derivative of the following function in the space provided on the answersheet:

Q=6-P²+

3

P4-P⁵

Write your derivative in the spacebelow: