The demand for fashion watches is Q = 9 – 0.7P + 2I. Assume that per capita income

4. The demand for fashion watches is Q = 9 – 0.7P + 2I.
Assume that per capita income I is $13. When the price of fashion watches is P
= $30, the price elasticity of demand is
A. -0.66.
B. -1.0.
C. -2.0.
D. -0.5.
E. -1.5.

8. Jane spends $210 per month on wine and beer. Her utility
function is given by
TU = 100WB, where W represents the number of bottles of wine
that she buys and B represents the number of cases of beer that she buys. If
wine costs $10 per bottle and beer costs $15 per case, she will maximize
utility by buying
A. 10.5 bottles of
wine and 7 cases of beer.
B. 2 bottles of wine
and 3 cases of beer.
C. equal amounts of
wine and beer.
D. 10 bottles of wine
and 13.33 cases of beer.
E. none of the above.

9. Camel Records produces records according to Q = 4L –
0.15L2. If labor costs $5 and records sell for $2, the optimal quantity of
labor is
A. 0.
B. 2.
C. 10.
D. 5.
E. 17.

14. A representative firm with short-run total cost given by
TC = 50 + 2q + 2q2 operates in a competitive industry where the short-run
market demand and supply curves are given by QD = 1,410 – 40P and QS = -390 + 20P.
Its short-run profit maximizing level of output is
A. 0 units.
B. 1 unit.
C. 2 units.
D. 5 units.
E. 7 units.

15. Henry’s Hosiery has exclusive rights to sell Yves
Chevrier lingerie in the United States. The demand for Yves underwear faced by
Henry is given by Q = 250 – 0.5P. Henry’s costs are given by TC = 50Q + 5.5Q2.
Its maximum monopoly profits are
A. $6,750.
B. $7,050.
C. $7,500.
D. $7,750.
E. $8,750.