Question

9.If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:

Group of answer choices

-$20 million.

$10 million.

$200 million.

$70 million.

-$10 million.

18. Which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries?

Group of answer choices

A decrease in the supply of strawberries.

A decrease in the demand for strawberries.

An increase in the demand for strawberries.

An increase in the supply of strawberries.

If the income elasticity of demand for a good is .59, then it is what type of good?

Group of answer choices

Income inelastic.

Price elastic.

Price inelastic.

Income elastic.

Inferior.

The negative slope of the demand curve reflects the:

Group of answer choices

positive relationship between price and quantity.

positive relationship between income and quantity.

proportional relationship between price and quantity.

inverse relationship between income and price.

inverse relationship between price and quantity.

Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other things being equal, will cause a(n):

Group of answer choices

upward movement along the supply curve for wheat.

leftward shift in the supply curve for wheat.

rightward shift in the supply curve for wheat.

downward movement along the supply curve for wheat.

An increase in both supply and demand causes which of the following?

Group of answer choices

Equilibrium quantity change is indeterminate.

Equilibrium price falls.

Equilibrium price rises.

Equilibrium price change is indeterminate.

Equilibrium quantity decrease

Answer 1

Ans. Option a

Economic profit = Total Revenue - Explicit Cost - Implicit Cost = 200 million - 190 million - 30 million = -$20 million

Ans. Option c

An increase in demand for strawberries creates a shortage of strawberries in the market at given money supply. This leads to increase in equilibrium price encouraging supply to increase quantity supplied which increases equilibrium quantity.

Ans 59. More information required on the good

Ans. Option e

Negative slope of demand curve is due to the law of demand which states that there is an inverse relationship between price of the good and quantity demanded of that good.

Ans. Option c

A decrease in price of corn will lead to producers shifting from production of corn to wheat which will increase the supply of wheat shifting its supply curve rightwards.

Ans. Option d

An increase in demand leads to an increase in equilibrium quantity and equilibrium price but increase in supply of the good lead to an increase in equilibrium quantity but decrease in equilibrium price. So, simultaneous increase in both will unambiguously increase equilibrium quantity but change in price will depend on the relative size of increase in demand and supply, so, it is unambiguous.

* Please don’t forget to hit the thumbs up button, if you find the answer helpful.

Thank You