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quanuty sold (c) increase iu quantit)sold (d) decrease in quantity sold (e) decrease in price.

14. Reanswer the question asMiming thai chemical worker wages fall; (a) (b) (c) (d) (e).

15. Which of the follo\ving would suggest that UCSB should raise tuition in order to generate more revenue? (a) a disco\ery that the demand for a UCSB education is inelastic at the current fee (b) an

increase in the tuition at other UC. campuses (c) a I discovery that the demand for a UCSB education is e\erywhere elasdc (d) (a) and (b) only (e) all of the above. [.

16. If, at a certain point on a demand curve, a V2% increa.se in the price produces a 10% reducdon in

I quandty, then we know elasdcit) i.s: (a) 20 and elastic .(b) 10 and inelasdc (c) 5 and eJasdc (d) 20 and i inelasdc (e) none of the above.

17. The elasdcit)- in the vicinit)- of five different ijpoints on a demand curve is as follows:

Elasticity

A 1.6

D I.O 0.5

E .01

At which of these points would a price increase be accompanied by a total revenue decrease? (a) A, B, & "C (b)C,D,&E (c)A&B (d)D&E (e) all of die above.

[,18. At which points above would a price increase lead to a revenue increase? (a) points & D only (b) points C, D, & E only (c) points D & E only (d) *11 the points (e) all but point C.

19. If the weeklv demand for strawberries in CoJeta is as follows;

Price Per Pound $2

$1.60 $1.50 $1.25 $1

Ouantin- Demanded (Pounds) 100 125 133 160 200

The price elasticity ofdemand is equal to: (a) 2.0 (b) 1.75 (c) 1.00 (d) 0.8 (e) 0.10.

20. Commodit) Z has an income elasticity of +0.8; if the incomes of consumers of Z decline, we would

expect: (a) a fall in the price of Z together with a rise in the quandty produced (b) a ri.se in the price of Z together with a rise in the quantit) produced (c) a fall in the price of Z together with a fall in the quantity produced (d) the creation of excess demjmd for Z (e) a shift in the supply curve for Z.

21. After die announcement of yet another gas price hike, Susan exclaims that she wont spend a penny more nor less on gas however high the price rises, Susans demand for gas is therefore: (a) perfecdy elastic .(b) perfecdy inelastic (c) inelastic

(d) elastic (e) unit elastic.

22. We would expect the price elasticity of demand for a particular brand of salt to be: (a) low because the elasdcit)- of demand for salt is low (b) low because salt is a necessit) (c) high because any brand of salt is similar to every other (d) low because .salt forms a small part of an individuals expenditure

(e) high because there are many substitutes for salt.

23. A technological innovation in the peanut industry reduces the price of peanuts and consumer expenditure is observed to fall. This suggests: (a) demand is elastic (b) supply is inelastic (c) supply is elastic (d) demand is inelastic (e) nothing about either supply or demand elasdcit).

24. As a result of a tax increase, the price of salt rises from 20C to 25«! pep pound and consumers expendinire rises from $20,000 per year to $25,000. The elasucity of demand is then: (a) 0 (b) 0.1 (c) 0.2 (d) 0.3 (e) 0.5.

25. A tax imposed on natural rubber production raises its price. As a result, the price of synthetic rubber rises by 6% and the quantity sold rises by 3%. In this case: (a) the elasticit) of demand for synthetic rubber is 2 (b) the elasticit)- ofdemand for s)nihetic rubber is V2 (c) the elasticit\ of supply for synthetic rubber is 2 (d) the ela.sticit\ of supply for synthetic rubber is V2 (e) none of the above.

26. If in the conditions of the previous question the rise in the price of natural rubber were 10%, then the cross elasticity of demand for 5 - 111 11 with respect to natural rubber would be equal to: (a) 6 (b) 3 (c) 0.6 (d) 0.3 (e) 0.1.

27. Two linear supply curves pass through the



origin, one flatter than the other. Then: (a) both are unit elastic so that total revenue is constant along each of them (b) the flatter curve is more inelastic (c) the flatter curve is more elastic (d) both are unit elasdc, but total revenue is greater at each price on the flatter curve (e) the elasticity varies conuimously for any straight line supply curve passing through the origin, but at any given price, elasticity is greater for the flatter curve.

28. Which of the following statements is incorrect?

(a) the effect on the equilibrium quantity of a sales tax will be smaller the more inelasdc is demand (b) the effect on the equilibrium price of a sales tax will be greater the more inelasdc is demand (c) the effect on the equilibrium price of a sales tax will be greater the more elasdc is supply (d) the effect on the equilibrium price of a sales tax will be smaller the more elasdc is demand, (e) the effect on the equilibrium quandty of a sales tax will be greater the less elasdc is demand.

29. In year one a fall m the price of tennis balls raises the equilibrium price of tennis rackets from $40 to $45 and the equilibrium quandty from 10,000 to 12,000. In the following year, a technological ad\ance in tennis racket construcdon reduces the equihbrium price to $40 again and increases the quandt) demanded from 12,000 to 15,000. In this case: (a) in year one the elasdcity of demand was 1.55 and in year two, 1.89

(b) in year one the elasdcity of demand was 1.55 and in year 2 the elasdcity of supply was 1.89 (c) in year one the elasdcity of supply was 1.55, and in year two, 1.89 (d) in year one the elasdcity of supply was 1.55, and in year two the elasticity of demand was 1.89 (e) none ofthe above.

30. Al always spends one quarter ofhis income on beer In this case his: (a) price elasticity of demand is clastic and his income elasticit) posiuve (b) price elasdcity of demand is elastic and his income elasticity of demand greater than one (c) price elasdcit) of demand is unitary and his income elasdcit) of demand is also unitary (d) price elasdcity of demand is inelastic and his income elasticity of demand unitary (e) none of the above.

31. Fred Jarvis recently lost his job; subsequendy, he has eaten more hambuiger and fewer avocados. This suggests that for Fred: (a) hamburger is a normal good and avocados an inferior good (b) both

hamburger and avocados are normal goods (c) both hamburger and avocados are inferior goods (d) ham burger is an inferior good and avocados a norma) good (e) the consumption of hamburger and avocados is irrational.

32. In which of the following are we unable to pre-diet whether the equilibrium price of tennis rackets will rise or fall? (a) when consumers incomes increase and there is a rise in the price of nylon strings

(b) when consumers incomes rise and there is a fall in the price of tennis balls (c) when consumers incomes fall and there is a fall in the price of tennis balls (d) when consumers incomes fall and there is a rise in tlW price of tennis balls (e) when consumers incomes rise and there is also a rise in the price of rounds golf.

33. If the quandty consumed increases as incor rises, then the good is: (a) undesirable (b) inelasti

(c) inferior (d) special (e) normal.

34. If X has a cross elasdcity with respect to Y ( - . , then: (a) a rise in the price of Y due to a rise i the cost of raw materials would raise the price of, (b) a fall in the price of Y due to increased foreig compeddon would raise the price of X (c) increase in consumers incomes would raise the prid of X but lower that of Y (d) an increase in consume incomes would lower the price of X but raise that of (e) none of the above.

35. If frost were to damage the Brazilian cc crop, then we would expect: (a) a rise in the price coffee and a rise in the price of tea (b) a rise in price of coffee and a fall in the price of tea (c) a ll in the price of coffee and a fall in the price of l

(d) a fall in the price of coffee and a rise in the pri of tea (e) none of the above.

36. Between 1983 and 1993, both die quandt) and the price of color TV sets was observed to increa Which of the following is inconsistent with this obs vadon? (a) an increase in consumer incomes aiT technological progress in the TN industry (b) i inct ease in consumer incomes and rise in the price f TV components (c) a fall in consumer incomes anj technological progress in die TV industry (d) a shj of tastes in favor of color T\ sets (e) a fall in the pri of cable TV services.



37. Which of the following would dellniieb cause the price of apples lo rise? (a) a revolutionai-y apple picking machine (b) a failure of the orange crop (c) :i decline in consumers incomes (d) a bnnipei crop of potatoes (e) a bumper crop of apples.

.38. A rise in the price of tennis rackets is observed ai the same time as an increase in the production of tennis rackets. This could have been caused by: (a) advances in the technolog)- of producing tennis rackets (b) a decline in consumers incomes (c) a rise in the price of tennis balls (d) a rise in the price of nylon strings (e) a fall in tennis club membership fees.

39. Commodit) Z is a normal good: if the incomes of consumers of Z decline, we would expect: (a) a fall in tbe price of Z together with a rise in the quantity produced (b) a rise in the price of Z together with a

"J** rise in the quanuty produced (c) a fall in the price of Z together with a fall in the quantit)- produced (d) the Creadon of excess demand for Z (e) a shift in the supply curve for Z.

40. If a tax of six cents per pound of peanuts is imposed, we would expect: (a) an increased equilibrium price and quantity of peanuts (b) a decreased

equilibrium price and quandt) of peanuts (c) a decrea.sed equilibrium price and an increased equilibrium quantit) of peanuts (d) an increased equilibri- um price and a decreased equilibrium quaiitit\ of peanius (e) none of the above.

" 41. The imposition of a tariff on imports of finished cotton goods may be expected to: a) increa.se domestic producdoii of cotton goods and lower their price (b) reduce imports and reduce domestic production of cotton goods (c) increase domestic pro-ducdon, reduce imports, and raise the price of cotton ; goods (d) lower domestic production, increase imports, and lower the price of cotton goods (e) reduce employment in the domestic cotton industry.

42. Which ol the following woidd not resuh in a shift of the market demand curve for apples? (a) a fall in the price of pears (b) an increase in the price of oranges (c) a fall in the wages of apple pickers (d) a general increase in incomes (e) a recession.

43. If a technological advance in tbe mining of iron were to reduce the price of steel, we would expect:

(a) the price of both autos and gasoline to fall (b) the price of autos to rise and the price of gasoline to fall

(c) the price of autos to fall and the price of gasoline to rise (d) the price of autos to rise and the price of gasoline to ri.se (e) none of the above.

44. Following the technical advance in the question above, the government imposes an excise tax on autos which keeps their price the same as before. If consumers expenditure on autos remains unchanged, then: (a) the demand for autos is elasdc (b) the demand for autos is inelasdc (c) the demand for autos is unit elasdc (d) the informadon is insufficient to determine the elasticity of demand for autos (e) none of the above.

45. As Monas income rises, she spends an increasing proportion on mo\ies. In this case: (a) her income elasticity of demand for movies is greater than one (b) her income elasdcity of demand for movies is less than zero (c) her income elasticity of demand for movies is greater than zero and less than one

(d) movies are an inferior good for her (e) none of the above.

46. After a tariff on the importation of motorcycles is removed, consumers expenditure on motorcycles falls. This suggests that the elasticity of demand for motorcycles is: (a) elastic (b) inelastic (c) unit elastic (d) infinite (e) zero.

47. Along a linear demand curve: (a) the elastici-t) of demand varies positively with the price (b) the elasticity of demand varies negatively with the price (c) the elasticity of demand is constant (d) the elasticit) ofdemand is less than unit) throughout (e) the elasticity of demand is greater than unity throughout.

48. An increase in demand raises the equilibrium price of cotton socks by 2% and the equilibrium quantity by 4%. In this case: (a) demand is elastic

(b) demand is inelastic (c) supply is elastic (d) suppl)- is inelastic (e) insufficient information to say an\-thing about elasticity.

49. If quantity demanded increases by 2% when price decreases by 1 %, elasticit) of demand is: (a) undefined (b) infinite (c) zero (d) two (e) inelastic.

50. If a portion of Mikes annual demand for pineapples is as follows:



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