Question

1. Suppose the price of blueberries increases and as a result, demand for apples falls. Based on this information blueberries and apples are

1. inferior goods
2. substitutes
3. normal goods
4. complements

2. Good X is unit elastic. Good Y is an elastic substitute. The own-price elasticity of good X is ---- and the cross-price elasticity of good Y is -----.

1. -1, +3
2. -3, +1
3. +3, -1
4. +1, -3

3. Suppose demand is perfectly elastic. If the government imposes a tax on this good, then

1. buyers pay the full tax
2. sellers pay the full tax
3. buyers and sellers each pay a portion of the tax
4. there is not enough information to answer this question

4. A firm produces 500 units and sells 400 units for a price of $8.20 each. What is the firm's total revenue?

1. 5000
2. 4100
3. 3200
4. 2300

Answer 1

Answer of Question 1

The answer is Option B (Substitude Goods).

Substitute goods or substitutes are at least two products that could be used for the same purpose by the same consumers. If the price of one of the products rises or falls, then demand for the substitute goods or substitute good is likely to increase or decline.

In above,  the price of blueberries increases and as a result, demand for apples falls. This means these goods are substitude of each other.

Answer of Question 2

The answer is Option D

When the elasticity of demand for a good is unit (or unitary) elastic, then price elasticity of good X is -1 (E_d = −1).

Answer of Question 3

The answer is Option B

If the demand curve is perfectly elastic (horizontal), and the supply curve isperfectly inelastic (vertical), the effect of a tax would be no change in equilibrium quantity and no change in price paid by consumers, and sellers would bear the entire burden of the tax.

Answer of Question 4

Total Revenue = $(400 * 8.20)

= $3,280 (This option is not available)