Question

7-

If demand is ________, a price cut ________ the total revenue.

elastic; increases

unit elastic; decreases

inelastic; increases

inelastic; does not change

5- Samantha was willing to pay $10 for a hamburger because she was hungry but she only paid $2.50. What is the consumer surplus Samantha gained from the hamburger?

$2.50

$7.50

$10.00

$12.50

9-

When the price rises, the firms' producer surplus ________. When the price falls, the firms' producer surplus ________.

increases; decreases

decreases; increases

decreases; decreases

increases; increases 10- When efficiency is attained, the sum of the total amount of consumer surplus and producer surplus is minimized. maximized. equal to the deadweight loss. equal to zero. 11- The "fair rules" view of fairness is based on income transfers from the rich to the poor. property rights and voluntary exchange. utilitarianism. allocating resources using majority rule. 12- If a price ceiling is set above the equilibrium price, then there will be a surplus of the good. there will be a shortage of the good. it has no effect on the equilibrium. the price ceiling will generate revenue for the government. 13- Suppose the equilibrium rent in Denver is $1,050. A rent ceiling of $755 per month leads to a surplus of apartments in Denver. a shortage of apartments in Denver. no change in the Denver apartment market. compared to the situation at the equilibrium rent, a decrease in the quantity of apartments demanded and an increase in the quantity of apartments supplied.

Answer 1

7.

Elastic demand means effect of change in the price is more on the quantity demand.

Hence if the demand is elastic, a price cut increases total revenue.

This is because when the demand is elastic, then effect of price decrease will be more, so the quantity demand will increase. Hence the total revenue will Increase.

Hence option first is the correct answer.

8.

Since consumer surplus is the difference between the maximum wiliness to pay for a good by the consumer and actual amount paid by the consumers.

Hence the consumer surplus will be=$10-$2.50

=$7.50

Hence option second is the correct answer.

9.

Since producer surplus is the area below the price line and above the supply curve.

Hence when the price rises, the firms' producer surplus increase. When the price falls, the firms' producer surplus decreases.

Hence option first is the correct answer.

First; increase, decreases.

10.

When efficiency is attained, the sum of the total amount of consumer surplus and producer surplus is maximised.

This is because there is no distortion and therefore no deadweight loss.

Hence option second is the correct answer.