Question

Suppose the government imposes a tax on each case of beer. The consumers will pay the majority of tax when demand is: a. perfectly elastic b. unit elastic. 24. c. elastic d. inelastic e. none of the above. Producers always pay the majority of taxes. A perfectly elastic demand curve is represented by a curve that is a. downward sloping to the right. b. upward sloping to the right c. vertical d. almost vertical e. horizontal 25. Country A is said to have a comparative advantage in producing chairs: a. when chairs are produced in both countries and wages are lower in country A b. when country A has an absolute advantage in the production of chairs. c. when the opportunity cost of producing chairs is lower in country A than country B d. when the opportunity cost of producing chairs is lower in country B than in country A e. none of the above 26. Ifthe total revenue of clothing manufacturers decreases when the price of clothing falls, the price elasticity of demand is a. greater than one (demand is elastic) b. less than one (demand is inelastic) c. unity (demand is unit elastic) d. not determinable from the information given. e. exactly zero 27. 28 If new reserves of natural gas were discovered and brought into production, and the population were to grow at the same time: a. the price of natural gas would rise. b. the price of natural gas would fall. c. the quantity demanded would fall. d. the price of natural gas might rise, fall or stay the same

Answer 1

Answer : 24) The answer is option d.

In case of inelastic demand rising price does not change the demand too much. Now if the government impose tax then the price will rise. So, if demand is inelastic then the majority burden of tax will be carried by consumers. Therefore, option d is correct.

25) The answer is option e.

The slope of perfectly elastic demand curve is horizontal. Therefore, option e is correct.

26) The answer is option c.

According to Ricardian model, if a country has lower opportunity cost than other country then that country has comparative advantage. So, here if country A has comparative advantage then this means that the country A has lower opportunity cost than the country B. Therefore, option c is correct.

27) The answer is option b.

In case of inelastic demand raising price increase the total revenue and falling price decrease the total revenue. Here the total revenue decreases due to falling price level. This means that here the demand is inelastic. Therefore, option b is correct.

28) The answer is option d.

Here if the population growth is lower than the natural gas production level then the price of natural gas will fall because supply will increase. If the population growth is higher than the natural gas production level then the price of natural gas will increase because demand will increase. Now if the population growth is equal to the natural gas production level then the price of natural gas will remain same because neither demand nor supply will change. Here the population growth level and the natural gas production level are not given. This means that the natural gas price may rise, fall or stay same as before. Therefore, option d is correct.