Please circle the most correct or appropriate answer. Please only choose one answer per question.
Problem 1. Which of the following event will shift the demand for apple to the right?
a. An increase in income
b. An increase in the price of bananas, a substitute for apple
c. A news release affirming that "an apple a day indeed keeps doctors away"
d. A sudden increase in birth rate
e. All of the above
Problem 2. If the government imposes a price above the equilibrium price, then this price is called__________, which will lead to a(n) ___________.
a. a price ceiling, excess demand
b. a price ceiling, excess supply
c. a price floor, excess demand
d. a price floor, excess supply
e. an equilibrium price, equilibrium output
Problem 3. If the demand curve is Q P D = 100 −10 and there is $1 price increase, then the elasticity of demand at P=2 is ___________. (Hint: you need to calculate the quantity demanded at P=2 and P=3, and then apply the elasticity formula.)
a. -0.25
b. -0.5
c. -0.75
d. -1
e. Insufficient information to derive the elasticity
Problem 4. If the absolute value of a demand elasticity is less than 1, then
a. the demand is inelastic, and hence a price rise will reduce the total revenue.
b. the demand is inelastic, and hence a price rise will increase the total revenue.
c. the demand is elastic, and hence a price rise will reduce the total revenue.
d. the demand is elastic, and hence a price rise will increase the total revenue.
e. there is no information on the change of total revenue after a price rise.
Problem 5. If the cross-price elasticity is negative, then the two goods are ___________.
a. unrelated
b. substitutes
c. complements
d. normal goods