The price elasticity of demand for Hulu is 1.4. What is the correct interpretation of this number?

a.a 1.4% increase in price results in a 1% decrease in the demand for Hulu.

b.a $1 increase in income increases the demand for Hulu by $1.4.

c.Hulu is a normal good.

d.a 1% increase in the price of Hulu results in a 1.4% decrease in the demand for Hulu.

There are two regions in a small country. One region has an absolute advantage in production of all goods. In this instance, the larger region would not bene t from trade with the smaller region.

a.True.

b.False.

Without any price control, the equilibrium price is $15. Then the government creates a price oor of $13. Which of the following is true?

a.The price control is binding and consumer surplus rises.

b.The price control is not binding and consumer surplus rises.

c.The price control is binding and consumer surplus falls.

d.The price control is not binding and consumer surplus does not change.