1. The demand for fashion watches is Q = 9 - 0.7P + 2I. Assume that per capita income I is $13. When the price of fashion watches is P = $30, the price elasticity of demand is
A. -0.66.
B. -1.0.
C. -2.0.
D. -0.5.
E. -1.5.
2. Jane spends $210 per month on wine and beer. Her utility function is given by TU = 100WB, where W represents the number of bottles of wine that she buys and B represents the number of cases of beer that she buys. If wine costs $10 per bottle and beer costs $15 per case, she will maximize utility by buying
A. 10.5 bottles of wine and 7 cases of beer.
B. 2 bottles of wine and 3 cases of beer.
C. equal amounts of wine and beer.
D. 10 bottles of wine and 13.33 cases of beer.
E. none of the above.
3. Camel Records produces records according to Q = 4L - 0.15L2. If labor costs $5 and records sell for $2, the optimal quantity of labor is
A. 0.
B. 2.
C. 10.
D. 5.
E. 17.
4. A representative firm with short-run total cost given by TC = 50 + 2q + 2q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,410 - 40P and QS = -390 + 20P. Its short-run profit maximizing level of output is
A. 0 units.
B. 1 unit.
C. 2 units.
D. 5 units.
E. 7 units.
5. Henry's Hosiery has exclusive rights to sell Yves Chevrier lingerie in the United States. The demand for Yves underwear faced by Henry is given by Q = 250 - 0.5P. Henry's costs are given by TC = 50Q + 5.5Q2. Its maximum monopoly profits are
A. $6,750.
B. $7,050.
C. $7,500.
D. $7,750.
E. $8,750.