Question

21.A good has many substitutes.
      
Inputs to production are scarce.

       
Firms' response to a price change is limited by the limited capacity of their production facilities.

       
A good has many substitutes.

       
The firm is experiencing diminishing returns to a variable input.

24. Suppose that the elasticity of demand for burgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for burgers increase?

  
2.5%

       
5.6%

       
25%

       
35%

30. Governments like to know the price elasticity of demand because it helps them determine how changes in sales tax rates will affect

      
Tax revenues.

       
Government spending

       
Income.

       
Profits

33. The perfectly competitive firm’s short-run supply curve is the part of the firm’s

Short-run average cost curve above the marginal cost.

       
Short-run marginal cost curve above the shut-down price.

       
Short-run average variable cost curve above the shut -down price.

       
Short-run marginal cost curve above the break-even price.

34. When a firm is experiencing diminishing marginal returns

      
Average cost is increasing.

       
Average cost is decreasing.

       
Marginal costs are increasing.

       
Marginal costs are decreasing.

Answer 1

24. d. 35%

Elasticity of demand= percentage change in quantity demanded / percentage change in price

Putting the values:

(-) 2.5= percentage change in quantity demanded / -14%

14 x 2.5 = percentage change in quantity demanded

35% = percentage change in quantity demanded

30. a. Tax revenues

If the price elasticity of demand is inelastic, the government is likely to earn higher tax revenues than when the elasticity is relatively elastic.

33. b. Short-run marginal cost curve above the shut-down price

The perfectly competitive firm’s short-run supply curve is the part of the firm’s marginal cost curve that lies above the average variable cost curve. Since shut down point is where MC =AVC, option b is correct.

34. c. Marginal costs are increasing.

A firm is experiencing diminishing marginal returns when as more factors of production are added, each additional unit adds less additional output. That is, the marginal product is decreasing and the marginal cost is increasing.