QUESTION 14

When the price of a product is increased 5 percent, the quantity demanded decreases 8 percent. In this range of prices, demand for this product is:

elastic

inelastic

cross-elastic

unitary elastic

QUESTION 15

In the following,Whichis Not true

A demand curve which is parallel to the vertical axis is perfectly inelastic

If a firm can sell more or less output at a constant price, demand is perfectly elastic

A demand curve which is parallel to the horizontal axis is perfectly inelastic

If the demand for a product is elastic, then total revenue will rise as price falls

QUESTION 16

Among the following statements,Whichis (are) correct

The price elasticity of demand of a straight-line demand curve is elastic in high-price ranges(range

above the mid-point) and inelastic on low-price ranges(range below the mid point)

If the price elasticity of demand for a product is unity, a decrease in price increase the quantity

demanded, but total revenue will be unchanged

If the demand for a product is elastic, then a higher tax will generate less tax revenue

All of the above

QUESTION 17

Of the following, which oneis False

A provincial government wants to increase the taxes on liquor to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is less than one

One ofthe main determinants of elasticity of supply is the amount of time the producer has to adjust inputs in response to a price change.

Suppose the income elasticity of demand for toys is +2.00. This means that a 10 percent increase in

income will increase the purchase of toys by 20 percent.

Suppose the income elasticity of demand for toys is +2.00. This means that toys are an inferior good

QUESTION 18

From statements given below, select the incorrect one

A positive income elasticity of demand coefficient indicates that a product is a normal good

A positive income elasticity of demand coefficient indicates that two products are substitute goods

A price ceiling means that government is imposing a legal price which is below the equilibrium price.

When government regulates rental price of the residential houses (as the maximum legal price that the house-owner can charge) in a city, it is an example of a price ceiling

1 points

QUESTION 19

If an effective ceiling price is placed on gasoline then:

the quantity demanded will exceed the quantity supplied

a black market for gasoline may evolve.

the federal government must establish some formal system for rationing it to consumers.

all of the above are likely outcomes

QUESTION 20

To the economist total cost includes:

explicit and implicit costs, including a normal profit.

Neither implicit nor explicit costs.

Implicit, but not explicit, costs.

explicit, but not implicit, costs.

QUESTION 21

The short run is a time period in which:

all factors of production are fixed

the level of output is fixed

the size of the production plant is variable

some factors of production are fixed and others are variable

QUESTION 22

The law of diminishing returns indicates that:

as extra units of a variable factor of production are added to a fixed factor of production, marginal product will decline beyond some point

because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped

the demand for goods produced by purely competitive industries is downward sloping

beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction

QUESTION 27

Marginal cost:

equals both average variable cost and average total cost at their respective minimums

is the difference between total cost and total variable cost

rises for a time, but then begins to decline when diminishing returns set in

declines continuously as output increases

QUESTION 28

Economies of scale are indicated by:

the rising segment of the average variable cost curve.

the declining segment of the long-run average total cost curve.

the difference between total revenue and total cost.

a rising marginal cost curve.