Question

Please answer 1-4. I am uncertain of my answers and I really need to do well for this assignment.

Multiple Choice: Please choose the best answer among the following choices. 1. Consider the product of gasoline. Its PES is estimated at 1.6. Which of the following would be true? a) Gasoline's supply is inelastic b) Its supply curve is a steep, upward sloping line c) Its supply curve is a vertical line d) Its supply curve is a flat, upward sloping line e) None of the above 2. Think about the market for gasoline again. Due to the rise of electrical and hybrid cars, there is a decrease in tastes and preferences for gasoline. What is the effect on this market? a) Price falls and quantity increases b) There is a greater decrease in quantity than in the price c) There is a greater increase in quantity than in the price d) The demand curve will become more steep e) None of the above 3. Please complete the following sentence. The more inelastic the supply curve... a) the more consumer surplus created by implementing a tax on a product b) the greater the tax burden on the buyers c) the greater the tax burden on the sellers d) the more a shift in the demand curve causes a greater change in the quantity than in the price e) None of the above 4. Consider a study of the telecommunications industry in Mexico. According to the data, the lack of competition in the industry leads to consumer Surplus being $25 billion lower per year than if there was more competition. What does this number mean? a) Tells us the decline in the amount of money people spend on telecommunications per year b) Tells us the increase in the price that people need to pay for telecommunications per year c) Tells us the decline in the consumption of telecommunications per year d) Tells us the decline in the net benefit to consumers of this industry per year due to the lack of competition e) None of the above

Answer 1

1.Since,PES>1,the supply for gasoline is elastic and therefore the supply curve will be flat and upward sloping.

Answer-D

2.The demand curve for gasoline shifts to the left due to decrease in its demand.As a result price and quantity of gasoline in the market falls.To find out of price falls more or quantity we need the value of elasticity of demand.

Answer-E

3.When supply is inelastic the suppliers bear greater burden of the tax,since the burden of the tax can't be shifted.

Answer-C

4.The number means that the consumer's surplus fell because of lack of competition.Lack of competition enable to firms to charge a price price for a lesser quantity.

Answer-D