True/False and Explain Questions:

Indicate whether each statement istrueorfalse, andbriefly justifyyour answer.Each question is worthtwomarks. You should draw a labelled diagram or provide an example to explain your answer, wherever appropriate.

1.Given the downward sloping demand curve and an upward sloping supply curve for sanitizers, a 10% increase in supply of sanitizers and a 5% increase in demand for sanitizers, will increase equilibrium quantity of sanitizers in the market.

2.A change in the labour market policy for fruit pickers in Australia, allowing backpackers to pick strawberries will increase the equilibrium price and quantity for strawberry jam.

3.Suppose that the Board of Directors of the local symphony proposes that the admission price to listen to the orchestra be raised as a means of raising additional funds to support music programs. Its members are implicitly assuming that the price elasticity of demand for a ticket is elastic.

4.With a new player Didi now in the rideshare market in New Zealand apart from Ola and Uber, the elasticity of demand for rideshares will fall.

5.Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that there's an economic profit of $20,000.

6.For any business, all sunk costs are fixed costs, but the reverse is not true.

7.Assume a bakery that currently uses 100 kilograms of flour is considering buying another 80 kilograms to bake more cakes to meet the demand. Economists would classify this as a long-run decision.

8.Diminishing marginal returns can set in for fast food restaurant in the long-run.

9.Airbus estimated that its Long-Run Average Costs (LRAC) fell by $0.2 million with the production of an A380 aircraft. This suggests Airbus experienced economies of scale.