1. Theprice elasticity of demand for cigarettes has been estimated to be -0.5. To reduce smoking by 75%, approximately how much tax needs to be added to a $1 pack of cigarettes?

a.$2.25

b.$0.50

c.$1.50

d.$0.75

2.WIth a linear demand function q = 10-p revenue is maximized at p = $5. What is the revenue maximizing price if demand doubles?

3.The demand function for rental apartments is q =960-7p and the supply function is q = 160+3p.The government makes it illegal to charge a rent higher than $35. How much excess demand will there be?

4.Maximilianconsumes two goods, x and y. His utility function is U(x,y) = Min{x,y}. Therefore x and y are perfect substitutes for Maximilian.

True

False