ECO 2023 Exam 2 Practice Questions and Answers If the price elasticity of demand for a good at the current price is E= -0.75, then a: - ANSWER-1 percent increase in price will lead to a 0.75 percent decrease in quantity demanded AND 10 percent increase in price will lead to a 7.5 percent decrease in quantity demanded
It is reasonable to expect: - ANSWER-the demand for Wawa or Racetrack brand
gasoline be more elastic than the demand for gasoline in general Which of the following is correct? - ANSWER-if the demand for a product is inelastic at a given price, a change in price will cause total revenue to change in the same direction Consider a perfectly competitive market described by the demand function P = 60 - 0.3Q and supply function = 10 + 0.2Q. Using the standard formula (versus the mid-point formula) for calculating elasticities, it may be concluded that at the equilibrium price and
quantity: - ANSWER-E= -1 and E= 1.5
Suppose the market demand for a good is described by the demand function P = 80/Q.It follows that the total revenue function relating the total revenues (TR) to the quantity
sold (Q) is: - ANSWER-TR = 80
A local theme park has estimated that in order to increase revenues generated from ticket sales it must reduce ticket prices. It follows that the theme park has estimated the
demand for visits to the park to be: - ANSWER-elastic
If a firm finds that it can generate $10,000 of revenue when the price of the good its sells is $6 per unit and $8,000of revenue when the price of the good it sells is $5 per unit, then:i. the demand for the good will be greater at the lower price than the higher price ii. the demand for the good is elastic in the $5-$6 price range iii. the demand for the good is inelastic in the $5-$6 price range iv. the demand for the good is unit elastic in the $5-$6 price range - ANSWER-iii It takes several months or years for the supply of housing to increase within a housing market (e.g., central Florida). It follows that: - ANSWER-the short-run supply curve for housing is less elastic than the long-run supply curve for housing If household income increases and the quantity of a good it purchases increases as a result, then: - ANSWER-the elasticity of income is positive, indicating the good is normal
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