1) Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function isQsMMoo = 12P – 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function is QsMCow = 9P – 3 at prices above $0.33 and zero at prices below $0.33. At a price of $2.00, the market supply of milk is:

a. QsMarket = 12P – 9

b. QsMarket = 12P – 6

c. QsMarket = 9P – 3

d. QsMarket = 21P – 9

2) Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined as QdJulia = 12 – 3P at prices below $4 and zero for prices above $4. Zach’s demand for milk is defined as QdZach = 10 – 2P at prices below $5 and zero for prices above $5. If the market price for milk is $4.50, market demand is:

a. zero units of milk.

b. 1 units of milk.

c. 10 units of milk.

d. 1.5 units of milk.

3) The demand for cars in New York City is given by the equation Q = 200 – 5p + a ps + b pg + c Y where Y is income, p is price of cars, ps is price of subway and pg is price of gasoline. The letters a, b, and c represent coefficients in front of the prices and income. If cars are an inferior good which of the following choices could be the values of a, b, and c?

a. a = 2, b = -4, c= 10

b. a= 2, b= -4, c= -10

c. a = 2, b= 4, c = 10

d. a= 2, b= 4, c = -10

4) In the market for diamonds, the revenue function R(p) is increasing when prices are between 0 and 10, flat between 10 and 20, and decreasing between 20 and 30. The demand function is therefore ____,____ , and ____ when prices are low, medium, and high.

a. elastict, inelastic, unit elastic

b. elastic, unit elastic, inelastic

c. inelastic, unit elastic, elastic

d. inelastic, elastic, elastic

5) Suppose Person A has a utility function given by U = XY, Person B has a utility function given by U = 2lnX + lnY, and Person C has a utility function given by U = 4X + 2Y. When the price of good X increases

a. Person A does not change the amount they spend on good X or Y, Person B does not change the amount they spend on good X or Y, Person C may or may not change their spending on X and Y

b. Person A spends less on X and more on Y, Person B does not change the amount they spend on good X or Y, Person C spends less on X and more on Y.

c. Person A spends less on X and more on Y, Person B spends less on X and more on Y, Person C spends less on X and more on Y.

d. Person A does not change the amount they spend on good X or Y, Person B spends less on X and more on Y, Person C spends less on X and more on Y.

e. None of these answers are correct