A firm faces a demand function D(p), for which the revenue-maximizing price is $10. The demand function is altered to 2D(p). What is the new revenue-maximizing price?
d.There is insufficient information to determine this.
e.none of the above.
32.If the supply curve for x is given by x ? 100p2, then the inverse supply curve is given by
e.none of the above.
33.Ed has 100 tons of manure. The lowest price at which he is willing to sell it is $10 per ton. Fred wants to buy 100 tons of manure. The most he is willing to pay is $8 per ton. The federal government offers to subsidize manure sales at a rate of $1 per ton. If Ed and Fred are the only people who deal in manure, then the deadweight loss caused by the subsidy is
e.none of the above.
34.Fred’s price elasticity of demand for milk is −2 at today’s prices when we measure price in dollars and quantity of milk in quarts. If the price per quart of milk stays the same but we measure quantity of milk in gallons and price in dollars, then what will be the elasticity of demand for gallons of milk? (A gallon is four quarts.)
35.In a small Kansas town, there are two kinds of gasoline consumers: 100 Buick owners and 50 Dodge owners. Each Buick owner has the demand function Db(p) ? max?0, 20 − 5p? and each Dodge owner has the demand function Dd ? max?0, 15 − 3p?. In this town, the market demand curve has
a.no kinks but gets steeper as price rises.
b.no kinks but gets flatter as price rises.
c.constant slope since individual demand curves have constant slope.
d.a kink at p ? 4 and another at p ? 5.
e.a kink at p ? 35/8.
36.In a certain city, the demand function for crack cocaine is q ? 1,000 − p, where p is the street price. The cocaine industry is competitive. Cocaine distributors can buy as much cocaine as they wish at a price of $50 per unit from Colombian sources. Whenever the city narcotics police catch a cocaine dealer, they confiscate all the cocaine that he has. The jails are full so they do not imprison the dealers. The police are able to catch the dealers about half the time, so they get about half the cocaine that enters the city. Instead of destroying confiscated crack, the police simply resell it on the street. If the original supply curve of cocaine on the streets was horizontal, what is the net effect of police activities on the market for crack in this city?
a.The amount purchased on the street is about 50 units smaller than it would be with no enforcement.
b.There is no effect, since all of the drugs reach consumers anyway.
c.Crack dealers will stop dealing in this city altogether, since they can make more money elsewhere.
d.The amount of crack purchased on the street decreases by about half.
e.The quantity purchased by dealers rises to make up for the amount that is confiscated.
37.If at current prices, the demand for a good is price-elastic, then for movements along the demand curve,
a.increasing the price will increase revenue.
b.decreasing the price will decrease revenue.
c.increasing the quantity sold will increase revenue.
d.increasing the quantity sold will decrease revenue.
e.More than one of the above statements are true.
38.The demand curve for a good is given by p ? 160 − 6q, where p is the price and q is the quantity of the good. Suppose that the number of consumers in the economy doubles; a “clone” of each consumer, who has exactly the same demand curve as the original consumer, appears. The demand curve for the doubled economy is described by
a.p ? 320 − 6q.
b.p ? 320 − 12q.
c.p ? 160 − 12q.
d.p ? 160 − 3q.
e.p ? 80 − 3q.
39.The demand curve for a good is given by p ? 60 − 8q, where p is the price and q is the quantity of the good. Suppose that the number of consumers in the economy doubles; a “clone” of each consumer, who has exactly the same demand curve as the original consumer, appears. The demand curve for the doubled economy is described by
a.p ? 60 − 16q.
b.p ? 120 − 8q.
c.p ? 60 − 4q.
d.p ? 120 − 16q.
e.p ? 30 − 4q.
40.The demand for drangles is given by D(p) ? (p ? 1)−2, where p is the price of drangles. If the price of drangles is $20, then the price elasticity of demand for drangles is
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