# 1.If the supply and demand functions are given by Qd = 30 – 2p and Qs = 4p. Which of the following s

1.If the supply and demand functions are given by Qd = 30 − 2p and Qs = 4p. Which of the following statements regarding the elasticity of demand at equilibrium is true? A. The elasticity of demand is 0.5. B. The elasticity of demand is -0.5. C. The elasticity of demand is -1. D. The elasticity of demand is 0.80. E. None of the above2.Suppose that the cross-price elasticity between good x and y is -.25 and that the price of good y increases. Which of the following statements is true? A. Demand for good x goes down. B. Goods x and y are demand substitutes. C. Revenue for the sellers of good x must increase. D. Goods x must be an inferior good. E. None of the above3.You are the manager of firm Equis. The price elasticity of demand for your firm is -1.25. One of your subordinates approaches you with the proposal of temporarily lowering the price of your product in an effort to increase sales revenue. Which of the following statements is true? A. Firm Equis sells a luxury good. B. Firm Equis sells an inferior good. C. If your goal is to increase sales revenue, you should not follow this recommendation. D. If your goal is to increase sales revenue, you should follow this recommendation. E. None of the above4.A consumer has income of \$300. Good x costs \$10 per unit and good y costs \$20 per unit. Suppose the price of good x increases to \$15 per unit and the price of good y decreases to \$15 per unit. Which of the following statement is true? A. The slope of the budget constraint remains the same before and after the price changes. B. The slope of the budget constraint changes from -0.5 to -1. C. The slope of the budget constraint changes from -10 to -15. D. The vertical intercept of the budget constraint remains the same before and after the price changes. E. None of the above5.Suppose that (q0 = 10, I0 = 8) and (q1 = 14, I1 = 6) are two points on a consumerâ€™s Engle curve for good x. Assume that we are analyzing a two-good world, good x and good y. Which of the following statements is true? A. The ICC (income consumption curve) between good x and good y has a positive slope. B. The ICC between good x and good y has a negative slope. C. The income elasticity of good x is larger than one. D. The income elasticity of good y is less than zero. E. None of the above6.Suppose that chicken breasts and beef steaks are demand substitutes. Suppose also that there was a reduction in the supply of chicken breasts because of avian flu. Which of the following statements is true? (hint: start by graphing each market in equilibrium) A. The equilibrium quantity of chicken should increase. B. The equilibrium price of beef steaks should increase. C. The equilibrium price of beef steaks should decrease. D. The equilibrium price of chicken should decrease. E. None of the above7.You are the manager of a local tea shop called Unicorn Tears. You have the following information about the daily demand for your businessQdtea = 50 − 5ptea + 4pcoffee + 6I− 3psugarWhere I is income. Suppose that the current equilibrium price and quantity are ptea*=3 and Qtea*=90. Which of the following statements is true? A. Tea is an inferior good. B. Tea and coffee are demand complements. C. Demand for tea is inelastic (i.e., less than one in absolute value) D. Demand for tea is elastic (i.e., larger than one in absolute value) E. Coffee is an inferior good8.Suppose the demand for good X is given by Qdx= 20 −7 Px − 6Py + 3I.Good Y is the alternative good and I stands for income. Which of the following statements is true? A. Good x is an inferior good and good x and y are complements. B. Good x is a luxury good and good x and y are substitutes. C. Good x is a normal good and good x and y are substitutes. D. Good x is a normal good and good x and y are complements. E. None of the above.9.If the demand elasticity is less than 1 in absolute value (inelastic segment) and the supply curve increases, which of the following statements is true? A. Revenue for the firm increases. B. Revenue for the firm decreases. C. Revenue for the firm remains unchanged. D. Revenue for the firm increases by 50%. E. We need more information to determine what happens to revenues.