Question

1) Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. The examples illustrate the importance of

A) The definition of a market in determining the price elasticity of demand.

B) A necessity versus a luxury in determining the price elasticity of demand.

C) The time horizon in determining the price elasticity of demand.

D) The availability of close substitutes in determining the price elasticity of demand.

2) You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

A) Be negative and your roommate's would be positive.

B) Be positive and your roommate's would be negative.

C) Be zero and your roommate's would approach infinity.

D) Approach infinity and your roommate's would be zero.

3) Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. The change in equilibrium quantity will be

A) Greater in the beef market than in the milk market.

B) Greater in the milk market than in the beef market.

C) The same in the milk and beef markets.

D) Any of the above could be correct.

4) Accounting Problem: If the cost object is a Ford F-150, Which of the following costs are Direct or Indirect?

Costs: Property Tax on Plant, Engine for Cars, Janitor supplies on Plant, Janitor Wages on Plant

Answer 1

Answer 1

B) A necessity versus a luxury in determining the price elasticity of demand. Option b is correct

Other option mentoned are wrong in respect to the question asked.

Answer 2

A) Be negative and your roommate's would be positive.

Other option are wrong in respect to the question asked because we are consuming less quantity and are about to change our preferences, therefore option A is the correct answer

Answer 3

increase in both the milk and beef markets

Other option are wrong in respect to the question asked