Question

ONLY ANSWER PLEASE!

Assume you are told there is an increase in the demand for electric cars. Based on this information, what would you predict in the market for electric cars?
a) The equilibrium price will decrease, and the equilibrium quantity will decrease.
b) The equilibrium price will increase, and the equilibrium quantity will increase.
c) The equilibrium price will increase, and the equilibrium quantity will decrease.
d) The equilibrium price will decrease, and the equilibrium quantity will increase.

A life-saving medication that has no substitutes is likely to have a price elasticity of demand that is less than one in absolute value.
a) True
b) False

Which of the following would cause a definite leftward shift of the supply curve?
a) an increase in taxes and an increase in the number of firms
b) an increase in the price of a substitute in production and a decrease in productivity
c) an increase in the cost of an input and an expectation by firms of a lower price
d) an increase in the price of a complement in production and a decrease in the cost of an input

A minimum wage is an example of a price floor and results in higher rates of unemployment.
a) True
b) False

When a hair salon charged $20 for a haircut it served 500 customers in a day. When it increased the price to $24, it served 420 customers in a day. What is the price elasticity of demand (in absolute value)?
a) 1.52
b) 0.96
c) 1.00
d) 1.65
e) 1.34

It is assumed in economics that firms want to maximize _______, and this assumption provides the foundation for the _______.
a) total revenue, law of demand
b) total revenue, law of supply
c) total profit, law of supply
d) total profit, principle of increasing marginal opportunity cost

The general rule in marginal analysis is that an activity should continue as long as the marginal benefit is at least as large as the marginal cost.   
a) True
b) False

In a production possibility frontier graph it is observed that points 1, 2, 3, and 4 lie on the PPF, point 5 is inside the PPF, and point 6 is outside the PPF. Which of the following statements is correct?
a) Point 6 can be produced with the currently available resources and technology but the resource use is inefficient.
b) Point 5 can be produced only if there is an increase in resource availability and/or an improvement in technology.
c) None of the statements listed is correct.
d) Point 5 is the only point that cannot be produced with the currently available resources and technology.
e) Points 1-5 can be produced with the currently available resources and technology and resources are used efficiently at all points.

The cross-price elasticity of demand between two goods is –1.9. This tells us these two goods are _______ and _______.
a) complements, used together
b) complements, used in place of each other
c) substitutes, used together
d) substitutes, used in place of each other

If there is a simultaneous increase in demand and decrease in supply, it is not possible for the equilibrium price to decrease.
a) True
b) False

Answer 1

Q) The correct answer is b. For a given supply of electric cars, increase in the demand for electric cars shift demand curve rightwards resulting in higher prices as well as quantity of electric cars.

Q) The given statement is true. Life saving drug having no substitutes is an inelastic good. As the price of it rises, quantity demanded will fall less in proportion than rise in prices resulting in price elasticity of demand less than one.

Q) The correct option is c. Increase in the input cost will increase prices and supply curve shifts leftwards.Expectations of lower prices will give producers to produce more today. However high input cost offset the rise in production. Thus supply curve shift leftwards.

Q) True. Price floor like minimum wage is usually set at higher prices than equilibrium price determined in the labour market. But at higher wage, quantity of labour demanded is less so workers are fired off which leads to surges in the unemployment rate.

Q) This is shown in the picture below.

Q) The correct option is c. Firms produces quantity at which Its profit is maximum that is at the point where MR=MC and this dictates the law of supply.

Q) True. As long as marginal benefit is greater, there is continnum in the production. When MB=MC, the firms stops producing.

Q) The correct option is c. Points inside PPC can be produced with the given level of technology and resources but resources are not used efficiently whereas points outside PPC can't be produced with the given level of resources and techt. Points on the PPC can be produced efficiently.

Q) The correct option is a. Cross price elasticity is negative in case of complements goods which are consumed together.

Q) The given statement is true. An increase in demand with simultaneous fall in supply would result in higher demand and lower supply. Therefore price will increase.

Q) Given Q, = 500 P, = 20 Q2 = 420 P2 = 24 Price elasticity of demand = (02-2,)[(@, +Q,)/2] = (420-500 (420-50oy[(420 750 (P2 -P, >/[ C +2)/2] (24-30)/[24+20)12] - 680 9:460] (4)/(22) = 001739 0, 1818 ñ 0096 Thus, the correct option is bo