Question

37. An increase in the price of Nike brand shoes will cause a decrease in the demand for Nike brand shoes.

Group of answer choices

True

False

38. If a cartel is successful, the group of firms will _______ output, charge a price that is _______, and total revenue will increase if the good sold has _______ demand.

Group of answer choices

increase, higher, inelastic

increase, lower, elastic

decrease, higher, elastic

decrease, lower, elastic

decrease, higher, inelastic

39. The average total cost curve passes through the minimum point of the marginal cost curve.

Group of answer choices

True

False

Answer 1

37. a. True

Nike brand shoes are a sort of luxury good. A good or service may be a luxury item, a necessity, or a comfort to a consumer. Luxury goods have a high elasticity of demand because they are sensitive to price changes. When a good or service is a luxury or a comfort good, it is highly elastic when compared to a necessary good. That is, increase in its price will result in decrease in its demand.

38. (e) decrease, higher, inelastic

A cartel is a grouping of producers that work together to protect their interests. Cartels are created when a few large producers decide to co-operate with respect to aspects of their market. Once formed, cartels can fix prices for members, so that competition on price is avoided.

A cartel restricts output so as to charge higher prices. If the good sold has inelastic demand, that is, the demand does not change much with price changes then the total revenue will increase. Since total revenue= price x quantity. If price increases and quantity remains unchanged due to inelastic demand then total revenue is bound to increase too.

39. b. False

The marginal cost curve passes through the minimum point of the average total cost curve.