Question

1)Whether or not firms can pass higher costs that they incur on to consumers depends on _________.

Select the correct answer below:

a)elasticity

b)quantity demanded

c)price

d)quantity supplied

2)As additional increments of resources are added to a certain purpose, the _________ benefit will __________.

Select the correct answer below:

a)total; decline

b)total increase

c)marginal; decline

d)marginal; increase

3)The landlord of an apartment complex has raised rents by 30%. Which of the following will happen?

Select the two correct answers below.

Select all that apply:

• Immediately, many renters will vacate the units.

• In the immediate aftermath of the rent increase, rent revenue will rise sharply as most renters will pay the higher rent and remain in the units.

• In the long run, many renters will choose to move to lower priced apartments.

• Renters will refuse to pay the higher rent as it as unexpected.

Answer 1

1. Option A. Elasticity

Explanation: Elasticity is the responsiveness of quantity demanded or supplied with a change in the price. The more inelastic side of the market bears the higher portion of the rise in cost.

2. Option C) marginal; decline

Explanation: Marginal benefit is the additional benefit derived from adding one more unit of input. When more and more units of resources are added, the marginal benefit of each additional unit keeps decreasing.

3. Correct 2 options:

• In the immediate aftermath of the rent increase, rent revenue will rise sharply as most renters will pay the higher rent and remain in the units.

• In the long run, many renters will choose to move to lower priced apartments.

Explanation: Most renters would not be able to find an alternative place immediately and therefore they will have to continue staying here. So, the revenue would increase immediately. However, in the long-run, most renters would vacate.