Question

In: Economics

If to increase sales a firm must lower the price on the last unit sold and all previous units as well then it faces:


If to increase sales a firm must lower the price on the last unit sold and all previous units as well then it faces:



a. a horizontal demand curve



b. a vertical demand curve



c. an upward sloping demand curve



d. a downward sloping demand curve


Demand increases if:



a. the average income of buyers in a market increases



b. the relative price of a substitute increases



c. there are more buyers in the market



d. all of the above



The price elasticity of demand measures:



a. how sensitive demand is to a change in price



b. how sensitive supply is to a change in price



c. how sensitive quantity demanded is to a change in price



d. how sensitive quantity supplied is to a change in price



When demand for a product is inelastic, a decrease in price:



a. decreases the firm's total revenue



b. increases the firm;s total revenue



c. leaves the firm's total revenue unchanged



d. increases the firm's total revenue more than it decreases



When the demand for a firm's product is elastic, a price decrease:



a. increases the firm's total revenue



b. decreases the firm's total revenue



c. leaves the firm;s total revenue unchanged



d. decreases the firm's total revenue more than it increases

Solutions

Expert Solution

1) If to increase sales a firm must lower the price on the last unit sold and all previous units as well then it faces an downward demand curve.answer. (A)

The monopolist firm selling the product faces a downward slope. This is because the firm will have to reduce the price of the product if it wants to sell more.

2) Generally Demand increases due to the below factors... answer is all the above.

Price
Usually viewed as the most important factor that affects demand. Products have different sensitivity to changes in price.

Income levels
When an individual’s income goes up, their ability to purchase goods and services increases, and this causes demand to increase. When incomes fall there will be a decrease in the demand for most goods

Consumer tastes and preferences
Changing tastes and preferences can have a significant effect on demand for different products. Persuasive advertising is designed to cause a change in tastes and preferences

Competition
Competitors are always looking to take a bigger share of the market, perhaps by cutting their prices or by introducing a new or better version of a product.

3) The price elasticity of demand measures the responsiveness of a good's quantity demanded to a change in its price.

​​​​​Answer is C.

4)When demand for a product is inelastic, a decrease in price would decrease firm total revenue (a)

It would indicate that the firm should not reduce the price of its goods as there is no beneficial outcome in doing so.

5)When the demand for a firm's product is elastic, a price decrease will result in increasing the total revenue of the firm( a)

​​​​

Rahul Sunny answered 1 year ago
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