For the next THREE questions, circle or highlight the correct underlined word in each pair to complete each sentence

. 2. (5pts) If the demand for Popcorn rises when the price of Pepsi falls at the movie theatre, then Popcorn and Pepsi are considered to be substitutes/complements and the cross-price elasticity of demand is positive/negative

. 3. If income rises and the demand for hamburger falls but the demand for pork chops rises, then hamburger is considered a normal/inferior good and its income elasticity of demand is positive/negative. Pork chops, however, are considered a normal/inferior good and its income elasticity of demand is positive/negative.

4. (5 pts) If total revenue of a firm increases when it raises its price then its demand is elastic/inelastic and the % change in quantity is greater than/less than the % change in price.

5. (5 pts) Three methods of dealing with externalities are direct regulation, incentive policies and voluntary restrictions. Explain how the government a) directly regulates alcohol and b) provides incentive policies to reduce alcoholconsumption.