Question

1.If the supply of widgets is price-elastic, then a 10 percent increase in the price of widgets will cause which of the following?

A. Shift the supply curve to the right by more than 10 percent

B. Increase the quantity supplied by more than 10 percent

C. Increase the quantity supplied by less than 10 percent

D. Shift the supply curve to the right by less than 10 percent

2.The capacity of the stadium for the local baseball team, the Uretown Yokels, is fixed. What does this mean about the price of tickets?

A. They are determined entirely by demand.

B. They are determined entirely by supply.

C. They are determined by a combination of demand and supply.

D. They are mainly determined by supply.

3. If a good is taxed, why would we expect the revenue collected to decrease over time?

A. Demand will become more inelastic.

B. Consumers will become more effective at finding untaxed alternatives

C. Supply will become more inelastic.

D. Sellers will become more effective at finding untaxed alternatives.

Answer 1

Ans 1)

AS price increases of good quantity supplied also increases this is common phenomenon shown by normal good hence if supply of widgets is price elastic that means it is always greater than 1 , in other words for 1% change in price there should be more than 1% change in quantity supplied

Hence option B is correct

Ans 2)

They are not only determined b supply but also depends on demand for an instance every team is different by its preference shown by game viewers which changes willingness to pay for match of different baseball team therefore this behavior should also be captured while pricing the tickets and that can only be captured with the help of movement of demand

Hence not only supply but also demand helps to determine the price of ticket

Option C is correct

Ans 3)

When any good is taxed its burden is shared by buyers and seller depending upon their elasticity of demand for the same good.

As consumers need to pay higher price than previously this increment in price of good becomes the source of revenue for government.

When good becomes expensive consumer tries to substitute the same therefore consumers learn over time about substitutes and other factors and gradually moves from good to its substitute hence revenue for government decreases as quantity demanded decreases

Option B is correct