Econ: Supply and Demand and Demand Function
Name: ________________________ Class: ___________________ Date: __________
ID: B
Econ 2350 Midterm Exam, July 13th, 2010
True/False (total 20 points; 1 point per question) Indicate whether the statement is true or false. Please mark 0 for False and 1 for True. ____ ____ ____ ____ ____ 1. If the price of leeks falls by $2 per pound, then the demand for leeks will rise by 10 pounds. Therefore we can conclude that the demand for leeks is elastic. 2. Marginal revenue is equal to price if the demand curve is horizontal. 3. If there is a price increase for a good that Marilyn consumes, her compensating variation is the change in her income that allows her to purchase her new optimal bundle at the original prices. 4. If the demand curve is a linear function of price, then the price elasticity of demand is the same at all prices. 5. If consumer 1 has the demand function x1 = 1,000 – 2p and consumer 2 has the demand function x2 = 500 – p, then the aggregate demand function for an economy with just these two consumers would be x = 1,500 – 3p for p < 500. 6. The equivalent variation in income from a tax is the amount of extra income that a consumer would need in order to be as well off after the tax is imposed as he was originally. 7. With quasilinear preferences, the equivalent variation and the compensating variation are the same. 8. If the demand curve for a good is given by the equation q 2 p , where q is quantity and p is price, then at any positive price, the elasticity of demand will be –1. ____ 9. The demand curve is inelastic for inferior goods and elastic for normal goods.
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____ 10. If the equation for the demand curve is q = 20 – 2p, then the ratio of marginal revenue to price is constant as price changes. ____ 11. The amount of a good supplied is independent of the price. If a sales tax is imposed on the good, then the price paid by consumers will not change at all. ____ 12. If the elasticity of demand curve for buckwheat is –1.25 at
ID: B
Econ 2350 Midterm Exam, July 13th, 2010
True/False (total 20 points; 1 point per question) Indicate whether the statement is true or false. Please mark 0 for False and 1 for True. ____ ____ ____ ____ ____ 1. If the price of leeks falls by $2 per pound, then the demand for leeks will rise by 10 pounds. Therefore we can conclude that the demand for leeks is elastic. 2. Marginal revenue is equal to price if the demand curve is horizontal. 3. If there is a price increase for a good that Marilyn consumes, her compensating variation is the change in her income that allows her to purchase her new optimal bundle at the original prices. 4. If the demand curve is a linear function of price, then the price elasticity of demand is the same at all prices. 5. If consumer 1 has the demand function x1 = 1,000 – 2p and consumer 2 has the demand function x2 = 500 – p, then the aggregate demand function for an economy with just these two consumers would be x = 1,500 – 3p for p < 500. 6. The equivalent variation in income from a tax is the amount of extra income that a consumer would need in order to be as well off after the tax is imposed as he was originally. 7. With quasilinear preferences, the equivalent variation and the compensating variation are the same. 8. If the demand curve for a good is given by the equation q 2 p , where q is quantity and p is price, then at any positive price, the elasticity of demand will be –1. ____ 9. The demand curve is inelastic for inferior goods and elastic for normal goods.
____ ____ ____
____ 10. If the equation for the demand curve is q = 20 – 2p, then the ratio of marginal revenue to price is constant as price changes. ____ 11. The amount of a good supplied is independent of the price. If a sales tax is imposed on the good, then the price paid by consumers will not change at all. ____ 12. If the elasticity of demand curve for buckwheat is –1.25 at