1

If the current price elasticity of demand for product X is 2, a 20% price cut will result in

a 10% increase of quantity demanded.

a 40% decrease of quantity demanded.

a 12% increase of total revenue.

a 16% increase of total revenue.

Question 2

A country X has the production possibilities frontier (PPF) depicted in Figure 1. If X decides to allocate all of its limited resources to the production of automobile, it would be operating at the point labeled

A

B

C

D

Question 4

If both demand and supply were to decrease, then the equilibrium

quantity would rise and price might fall or rise.

price would fall and quantity might rise or fall.

price would rise and quantity might rise.

quantity would fall and price might rise or fall.