Question 1(1 point)

The demand for video recorders has been estimated to be Q_v= 134 1.07P_f+ 46P_m 2.1P_v 5I, where Q_vis the quantity of video recorders, P_fdenotes the price of video recorder film, P_mis the price of attending a movie, P_vis the price of video recorders, and I is income. Based on the estimated demand equation, we can conclude

Question 1 options:

	the demand for video recorders is neither inferior nor inelastic, and video recorder film is not a substitute for video recorders.
	video recorder film is a substitute for video recorders.
	the demand for video recorders is inelastic.
	video recorders are inferior goods.

Question 2(1 point)

In a competitive market, the market demand is Q^d= 60 6P and the market supply is Q^s= 4P. A price ceiling of $3 will result in a

Question 2 options:

	surplus of 30 units.
	shortage of 30 units.
	surplus of 12 units.
	shortage of 15 units.

Question 3(1 point)

If the cross-price elasticity between ketchup and hamburgers is 2.5, a 2 percent increase in the price of ketchup will lead to a

Question 3 options:

	5 percent drop in quantity demanded of ketchup.
	5 percent increase in quantity demanded of ketchup.
	5 percent increase in quantity demanded of hamburgers.
	5 percent drop in quantity demanded of hamburgers.

Question 4(1 point)

Net benefits in the table

Control variable	Total Benefits	Total Costs	Net Benefits	Marginal Benefit	Marginal Cost	Marginal Net Benefit
Q	B(Q)	C(Q)	N(Q)	MB(Q)	MC(Q)	MNB(Q)
0	0	0	0
1	900	100	800	900	100	800
2	1,700	300	C	800	200	600
3	2,400	600	1,800	700	E	400
4	A	1,000	2,000	600	400	200
5	3,500	1,500	2,000	500	500	F
6	3,900	2,100	1,800	D	600	200
7	4,200	2,800	1,400	300	700	400
8	4,400	B	800	200	800	600
9	4,500	4,500	0	100	900	800
10	4,500	5,500	1,000	0	1,000	1,000

Question 4 options:

	initially remain relatively stable and then decrease.
	initially increase, reach a maximum, and then decrease.
	initially decrease, reach a minimum, and then increase.
	remain relatively stable over different values for the control variable.

Question 5(1 point)

Suppose the firm achieves total revenue of $1,000 by selling 100 units, while facing total costs of $900. If the firm produces and sells 101 units, their total revenue is $1,009 and their total costs is $905. Should the firm produce and sell the extra unit?

Question 5 options:

	yes, since marginal profits are positive
	no, since profits are declining
	yes, since profits are positive
	no, since marginal profits are declining

Question 6(1 point)

Suppose the firm achieves total revenue of $1,000 by selling 150 units, while facing total costs of $900. If the firm produces and sells 151 units, their total revenue is $1,005 and their total costs is $950. Should the firm produce and sell the extra unit?

Question 6 options:

	no, since marginal profits are positive
	no, since marginal profits are declining
	yes, since profits are positive
	yes, since the marginal benefit is positive

Question 7(1 point)

For the following, please answer "True" or "False" and explain why. When a market is in disequilibrium consumers and producers change their behavior. As a result, the market reaches equilibrium.

Question 7 options:

Question 8(1 point)

Suppose the demand for X is given by Q_xd= 80 P_X3P_Y5M + 3A, where P_Xrepresents the price of good X, P_Yis the price of good Y, M is income, and A is the amount of advertising on good X. Based on this information, we know that

Question 8 options:

	good X is an inferior good.
	good X is a normal good.
	good X is a complement for good Y.
	good Y is a normal good.

Question 9(1 point)

The market demand for cheese is Q^d= 30 2P and the market supply is Q^s= 4P. The government imposes a price floor of $4 in the market for cheese. This will

Question 9 options:

	create an excess supply of 4 units.
	create an excess demand of 4 units.
	possibly not change the equilibrium price as well as create excess demand and excess supply of 4 units.
	not change the equilibrium price of cheese.

Question 10(1 point)

Suppose the following information is known about a market: 1. Sellers will not sell at all below a price of $2. 2. At a price of $10, any given seller will sell 10 units. 3. There are 100 identical sellers in the market. Assuming a linear supply curve, use this information to derive the market supply curve.

Question 10 options:

Question 11(1 point)

Suppose the demand function is given by Q_x^d= 8P_x^-0.5P_y^0.25M^0.12H. Then the demand for good x is

Question 11 options:

	inelastic.
	perfectly elastic.
	unitary.
	elastic.

Question 12(1 point)

If the demand function for a particular good is Q = 20 8P, then demand at a price of $1 is

Question 12 options:

	indeterminable.
	elastic.
	unit elastic.
	inelastic.

Question 13(1 point)

The demand for good X is estimated to be Q_x^d= 10,000 4P_X+ 5P_Y+ 2M + A_X,where P_Xis the price of X, P_Yis the price of good Y, M is income, and A_Xis the amount of advertising on X. Suppose the present price of good X is $50, P_Y= $100, M = $25,000, and A_X= 1,000 units. Based on this information, the income elasticity of good X is

Question 13 options:

	8.157.
	0.082.
	0.816.
	0.008.

Question 14(1 point)

Suppose the demand for good x is ln Q_x^d= 21 0.8 ln P_x 1.6 ln P_y+ 6.2 ln M + 0.4 ln A_x. Then we know good x is

Question 14 options:

	a Giffen good.
	a normal good.
	an inferior good.
	an elastic good.

Question 15(1 point)

The demand for good X has been estimated to be ln Q_x^d= 100 2.5 ln P_X+ 4 ln P_Y+ ln M + ln A. The advertising elasticity of good X is

Question 15 options:

	0.0.
	1.0.
	4.0.
	2.5.

Question 16(1 point)

Suppose the demand function is given by Q_x^d= 8P_x^-0.5P_y^0.25M^0.12H. Then the cross-price elasticity between goods x and y is

Question 16 options:

	0.50.
	4.00.
	8.33.
	0.25.

Question 17(1 point)

Suppose the growth rate of the firm's profit is 7 percent, the interest rate is 10 percent, and the current profits of the firm are $120 million. What is the value of the firm?

Question 17 options:

	$44 million
	$4,400 million
	$6,800 million
	$4,280 million

Question 18(1 point)

Suppose the demand for X is given by Q_x^d= 80 P_X+ 3P_Y+ 5M + 3A, where P_Xrepresents the price of good X, P_Yis the price of good Y, M is income, and A is the amount of advertising on good X. Based on this information, we know that

Question 18 options:

	good X is a substitute for good Y.
	good X is an inferior good.
	good X is a complement for good Y.
	good Y is a normal good.

Question 19(1 point)

At what level of output does marginal cost equal marginal benefit?

Number Units Produced	Total Benefit	Total Costs
0	0	0
10	120	40
20	200	100
30	270	170
40	310	260
50	330	370

Question 19 options:

	20
	30
	40
	10

Question 20(1 point)

You are considering paying $250,000 for an annuity today, and you know you need a yearly cash stream of $20,000 for expenses. What is the minimum annual interest rate (that would create a perpetual cash flow stream) needed for the annuity?

Question 20 options:

	25 percent
	8 percent
	12.5 percent
	5 percent

Question 21(1 point)

Suppose market demand and supply are given by Q^d= 300 4P and Q^S= 50 + 3P. The equilibrium quantity is

Question 21 options:

	100.
	80.
	115.
	120.

Question 22(1 point)

For the following, please answer "True" or "False" and explain why. The quantity of a good that consumers demand depends only on the price of the good.

Question 22 options:

Question 23(1 point)

Suppose demand is given by Q_x^d= 50 4P_x+ 6P_y+ A_x, where P_x= $4, P_y= $2, and A_x= $50. What is the advertising elasticity of demand for good x?

Question 23 options:

	1.12
	0.38
	0.52
	1.92

Question 24(1 point)

Based on the graph, if the government imposes a price ceiling of $25 in this market then over time, there will be

Question 24 options:

	a surplus of 100 units.
	a shortage of 200 units.
	neither a shortage or a surplus as price will settle at equilibrium.
	a surplus of 200 units.

Question 25(1 point)

Explain why the equilibrium price is called the market clearing price.

Question 25 options:

Question 26(1 point)

Suppose the demand for good x is ln Q_x^d= 21 0.8 ln P_x 1.6 ln P_y+ 6.2 ln M + 0.4 ln A_x. Then we know goods x and y are

Question 26 options:

	normal goods.
	substitutes.
	complements.
	inferior goods.

Question 27(1 point)

Suppose market demand and supply are given by Q^d= 100 2P and Q^S= 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total cost to the government will be

Question 27 options:

	$900.
	$1,650.
	$1,375.
	$1,125.

Question 28(1 point)

Suppose the demand for X is given by Q_x^d= 100 2P_X+ 4P_Y+ 10M + 2A, where P_Xrepresents the price of good X, P_Yis the price of good Y, M is income, and A is the amount of advertising on good X. If advertising on good X increases by $10,000, then the demand for X will

Question 28 options:

	increase by 100,000.
	decrease by 100,000.
	increase by 20,000.
	decrease by 20,000.

Question 29(1 point)

The demand for good X is estimated to be Q_X^d= 100 2P_X+ 5P_Y+ 4M + A_X,where P_Xis the price of X, P_Yis the price of good Y, M is income, and A_Xis the amount of advertising on X. Suppose the present price of good X is $50, P_Y= $100, M = $10,000, and A_X= 1,000 units. Based on this information,

Question 29 options:

	Quantity demanded of X = 40,700 units and X is an inferior good.
	Quantity demanded of X = 40,700 units and X is a normal good
	Quantity Demanded for X = 41,500 units and X is an inferior good
	Quantity demanded of X = 41,500 units and X is a normal good

Question 30(1 point)

If the cross-price elasticity between goods X and Y is positive, we know the goods are

Question 30 options:

	inelastic.
	substitutes.
	inferior goods.
	complements.

Question 31(1 point)

The demand for good X has been estimated to be ln Q_x^d= 100 2.5 ln P_X+ 4 ln P_Y+ ln M. The own price elasticity of good X is

Question 31 options:

	4.0 percent.
	2.5.
	4.0.
	2.5 percent.

Question 32(1 point)

For the following, please answer "True" or "False" and explain why. During a severe winter, the price of home heating oil is expected to be more than it would be during a normal winter.

Question 32 options:

Question 33(1 point)

Given a linear demand function of the form Q_X^d= 500 2P_X 3P_Y+ 0.01M, find the inverse linear demand function assuming M = 20,000 and P_Y= 10.

Question 33 options:

	PX= 500 2QX.
	PX= 335 2QX.
	PX= 335 0.5QX.
	PX= 500 2QX 3PY+ 0.01M.

Question 34(1 point)

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is

Question 34 options:

	$3,000.
	$2,562.
	$3,200.
	$439.

Question 35(1 point)

Suppose the demand function is given by Q_x^d= 2P_x^0.5P_y^-0.45M^1.2H. Then good X

Question 35 options:

	is a Giffen good.
	is an inferior good.
	is a normal good.
	is a substitute for good Y.

Question 36(1 point)

Suppose the demand function is given by Q_x^d= 10P_x^0.9P_y^0.5M^0.22H. Then the cross-price elasticity between goods x and y is

Question 36 options:

	0.9.
	0.5.
	0.22.
	0.5.

Question 37(1 point)

The demand for good X is estimated to be Q_x^d= 10,000 4P_X+ 5P_Y+ 2M + A_Xwhere P_Xis the price of X, P_Yis the price of good Y, M is income, and A_Xis the amount of advertising on X. Suppose the present price of good X is $50, P_Y= $100, M = $25,000, and A_X= 1,000 units. What is the demand curve for good X?

Question 37 options:

	61,500 4PX
	61,300
	61,300 4PX
	61,500

Question 38(1 point)

A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be ln M = 14.666 + .021 ln C 0.036 ln r, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits. Based on this study, a 5 percent increase in interest rates will cause the demand for money to

Question 38 options:

	increase by 1.8 percent.
	drop by 0.18 percent.
	increase by 0.18 percent.
	drop by 1.8 percent.

Question 39(1 point)

[Appendix material: calculus required] Suppose total benefits and total costs are given by B(Y) = 600Y 12Y²and C(Y) = 20Y². What level of Y will yield the maximum net benefits?

Question 39 options:

	600/32
	300/64
	600/64
	300/8

Question 40(1 point)

If the demand curve for a particular good is Q = 20 8P, then the price elasticity of demand (in absolute value) at a price of $1 is

Question 40 options:

	8.
	2.
	2/3.
	1/8.