Question

a)Which of the following statements best describes the relationship between short-run supply elasticity and long-run supply elasticity?

A	For many products, long-run supply is likely to be more price elastic than short-run supply.
B	For products that can be recycled, long-run supply is likely to be more price elastic than short-run supply.
C	For many products, long-run supply is likely to be less price elastic than short-run supply.
D	Both a) and b) are generally true, but c) is generally false.

b)Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market?

A	a rightward shift in supply and a rightward shift in demand.
B	a rightward shift in supply and a leftward shift in demand.
C	a leftward shift in supply and a rightward shift in demand.
D	a leftward shift in supply and a leftward shift in demand.

c)Marginal utility is

A	always increasing.
B	maximized when total utility is zero.
C	the slope of the total utility function.
D	always decreasing.

d)Suppose that, over a period of 6 months, the price of corn increased. Yet, the quantity of corn sold by producers decreased. This statement contradicts the law of supply.

	True
	False

Answer 1

a):- Right Answer is A- For many products long-run supply curve is likely to be more price elastic than short-run supply curve. Because in the short run price elasticity of supply is inelastic on the other hand price elasticity of supply is more elastic in the long run.

Reasons

Option B- supply of recyled products is shown to be extremely elastic in the short run.

Option C- for many products, shor run supply curve is likely to be less price elastic than long run supply.

Option D- A is true B & C are generally false

b) :- Right Answer is D- a leftward shift in supply and a leftward shift in demad because decrease in supply as well as demad causes decrease in equilibrium quantity.

Reasons

Option A:- both rightward shifts of demand and supply curve leads to increase in equilibrium quantity.

Option B & C:- its very difficult to say whether the equilibrium quantity changes or not because it depends upon the degree of elasticity

c) :- Right Answer is option C- slope of the total utility function because Marginal Utility curve is the slope of Total utility. The shape of the TU curve means that MU is high for small quantities, reduces and then becomes negative as the quantities increases.

Reasons

OptionA:- Mu iDDs always increasing is wrong because Law of Diminishing Marginal utility states that as the amount consumed of a commodity increases, the utility derived from consuming each additional units of the commodity goes on decreasing.

Option B:- MU maximised when TU is Zero is wrong because TU is Maximised when MU become zero.

Option D:- Mu is always decreasing is wrong because Mu of each homogeneous unit increases as the supply of units decreases.

d) :- Right Answer is True. This statement is contradict the Supply of Law because the Law of Supply states that there is a direct relationship between price of a commodity and supply of given commodity. That is if price rises supply also rises and vice-versa.