Question

Suppose consumers spent $42 million on Christmas trees last year, when the average tree cost was $30. This year they spend $42 million, when the average tree costs $25. Assume that everything else remains constant. This data suggests that:​

Select one:

a.

​the demand for trees is inelastic.

b.

​total revenue to tree producers rose this year.

c.

​consumers bought the same number of Christmas trees this year as last year.

d.

​the price of the Christmas trees stayed the same.

e.

​the demand for trees is unit elastic.

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Which of the following is likely to increase the supply of wheat?​

Select one:

a.

​A decrease in the price of corn

b.

​An increase in the cost of fertilizer

c.

​An increase in land prices

d.

​A decrease in the price of bread

e.

​An expectation that the price of wheat will be higher in near future

Question 9

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The figure below shows the cost and revenue curves for a monopolist. The deadweight loss arising under the monopoly is represented by the area:​

​

Figure 9.8

​

Select one:

a.

​eda.

b.

​dafc.

c.

​abf.

d.

​ecf.

e.

​dabc.

Question 10

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Which of the following goods will have a higher price elasticity of demand?​

Select one:

a.

​A good that represents a small proportion of the consumer’s budget.

b.

A good that is a necessity.

c.

​A good with few substitutes.

d.

​A good that is broadly defined.

e.

​A good with many substitutes.

Answer 1

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year $42 million when the average tree costs $25.Assuming that nothing else changed,the data suggested that

e.The demand for trees is Unit elastic

(Unit elastic demand is when a change in price is met with a proportionate change in demand,the total consumer spending however remains same at each level.Thus in the above example the demand is unit elastic as the consumer spending remains the same ,which is $42 million with the change in average cost of trees from $30 to $25)

Which of the following is likely to increase the supply of wheat?

a.Decrease in the price of corn

(According to the Law of Supply,increase in price leads to increase in supply.Wheat and corn are substitutes,so when the price of corn decreases,it will lead to decrease in the supply of corn,how ever the price of wheat is still greater as compared to corn will lead to an increase in the supply of wheat)

Which of the following goods will have a higher price elasticity of demand?

e.A good with many substitutes.

(A good with many substitutes has a higher price elasticity of demand,as an increase in price often leads to consumers shifting their demand to the next substitute available)

UNABLE TO ANSWER THE QUESTION ABOUT THE DEAD WEIGHT LOSS UNDER MONOPOLY AS THE SAID FIGURE 9.8 IS NOT PROVIDED.