Question

In: Economics

Consider the case of a good for which the absolute value of the price elasticity of...

Consider the case of a good for which the absolute value of the price elasticity of demand is greater than one. A fall in price would be associated with

Group of answer choices

A a marginal revenue greater than zero and a rise in total revenue

B a marginal revenue less than zero and a fall in total revenue

Consider the case of a good for which the absolute value of the price elasticity of demand is less than one. A fall in price would be associated with

Group of answer choices

A a marginal revenue greater than zero and a rise in total revenue

B a marginal revenue less than zero and a fall in total revenue

The absolute value of the price elasticity of demand of a straight-line demand curve

Group of answer choices

A is constant and equal to one

B varies over its length from infinity to zero (as price falls)

C varies over its length from zero to infinity (as price falls)

A drought that destroys half of all farm crops would be good for farmers if the price elasticity of demand for farm crops were

Group of answer choices

A elastic

B inelastic

C equal to one

Although such a drought might be good for farmers, an individual farmer would not destroy his own crops in the absence of a drought because the price elasticity of demand for his own crops is

Group of answer choices

A equal to one

B infinitely elastic

C infinitely inelastic

Solutions

Expert Solution

Q1 Answer is A.

When elasticity is greater then one fall in price will increase the total revenue and rise in price will decrease the total revenue.

Q2 Answer is B.

When elasticity is less then one then fall in price will decrease the total revenue and increase in price will increase the total revenue.

Q3 Answer is B.

Value of elasticity as price fall starts from infinity to zero.

At vertical axis it is infinity and at horizontal axis it is zero.

Q4 Answer is B. Inelastic

If demand is inelastic then increase in price will increase the total revenue. So when crop get destroyed supply will decrease and price will increase. Now if demand is inelastic then total revenue of farmer will increase.

Q5 Answer is B. Infinitely inelastic.

When demand is infinitely elastic then farmer could sell as many output as he wants at given price. So he will not destroy because he can sell all his output at given price.

#Please rate positively...thank you

Rahul Sunny answered 1 year ago

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