Question

In: Economics

Economic profit is equal to a. total revenue minus explicit and implicit costs. b. total revenue...

Economic profit is equal to

a. total revenue minus explicit and implicit costs.

b. total revenue minus explicit costs.

c. marginal revenue minus marginal cost.

d. total revenue minus implicit costs.

e. total revenue minus dividends and interest.

If the price elasticity of demand is 4, a 5 percent decrease in price will increase quantity demanded by

a. 25%

b. 10%

c. 8%

d. 20%

If the calculated elasticity of demand between two points is 2.26, demand is considered

a. very inelastic.

b. very elastic.

c. unitary elastic.

d. very inelastic in the short run.

e. the responsiveness to price change.

Expert Solution

Economic profit = Total revenues - (explicit costs + implicit costs)
a. total revenue minus explicit and implicit costs.

Price elasticity of demand Ed = Percentage change in quantity demanded/percentage change in price
4 = x/.05
x = (.05)*4
x = .20

d) 20%

Price elasticity of demand Ed = Percentage change in quantity demanded/percentage change in price
When a 1% change in price produces a more than 1% change in quantity demanded, the good has price elastic
demand.
When a 1% change in price produces a less than 1% change in quantity demanded, the good has price inelastic
demand.
When a 1% change in price produces a 1% change in quantity demanded, the good has unit elastic
demand.

If the calculated elasticity of demand between two points is 2.26, demand is considered
to be very elastic because the elasticity of demand is greater than 1.

b. very elastic.

Rahul Sunny answered 1 year ago

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