Question

1. What is the correct numerical change in E_d as you move from the top of the demand curve to the bottom?

a. < 1 to > 1         b. > 1 to < 1        c. 1 to 0      d. 0 to 1

2. If the %Δ Income = - 2 and the %Δ Q_D= - 4, what is the income elasticity for the product and what type of product relationship does it have?

a. .5, Superior               b. .5, Inferior                c. 2, Superior                d. 2, Inferior

3. Which equation illustrates where utility is maximized?

1. MU_a/P_a= MU_b/P_b = MU_c/P_c = MU_d/P_d= …… MU_z/P_z= MU_money
2. P_a/MU_a=P_b/MU_b =P_c/MU_c=P_d/MU_d= …….MU_z/P_z=MU_money
3. When the TU_a = TU_b
4. When TU_a/MU_a equals the highest valueon a given table of values

4. Calculate the economic profits or losses for the following situation.  A person was earning $67,000 a year in her job and earns $15,000 a year from financial investments. She then quit her job and sold off her $1 million in financial investments to start her own company.  The company had explicit costs of $1,900,000 and revenues of $2,000,000.

1. Economic Loss  = $982,000
2. Economic Loss  = $2,000
3. Economic Profit  = $18,000
4. Economic Profit  = $33,000

Answer 1