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Suppose that the price of Good Y increases by 5%. If the quantity supplied of Good Y remains constant, then the price elasticity of supply of Good Y is .
less than 0.
greater than 1.
impossible to determine from the information given.
Explanation
Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.
Which of the following is true of the relationship between the demand curve and the marginal revenue curve in a monopolistic structure?
The demand curve is always greater than or equal to the marginal revenue curve.
The demand curve is always less than or equal to the marginal revenue curve.
The demand curve is always greater than the marginal revenue curve.
The demand curve is always equal to the marginal revenue curve.
The marginal revenue curve decreases while the demand curve increases.
Explanation
A monopolist faces a downward sloping demand curve, indicating market power, in contrast to the horizontal demand curve faced by perfectly competitive firms. A monopolist faces a downward sloping marginal revenue curve as well.
The monopolist's marginal revenue curve has the same y-intercept (intercept on the price-axis) as the demand curve, but has a steeper slope. Therefore, the demand curve is always equal to (at the intercept) or greater than (everywhere after the intercept) the marginal revenue curve. Answer choice "The demand curve is always greater than or equal to the marginal revenue curve" is correct.
The other answer choices are distortions of this relationship.
Use the following graph for questions 9 - 11
Increasing the price of oranges at point D will result in:
- An increase in total revenue
- A decrease in quantity demanded
- Movement toward a portion of the demand curve that is more elastic
1, 2, and 3
1 only
2 only
3 only
1 and 2
Explanation
If we are in the inelastic portion of the demand curve, an increase in price will increase TR, since the price effect is greater than the quantity effect. Quantity will still decrease.
Suppose that the price of Good Y increases by 5%. If the quantity supplied of Good Y remains constant, then the price elasticity of supply of Good Y is .
less than 0.
greater than 1.
impossible to determine from the information given.
Explanation
Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.
Use the following graph for questions 9 - 11
Increasing the price of oranges at point D will result in:
- An increase in total revenue
- A decrease in quantity demanded
- Movement toward a portion of the demand curve that is more elastic
1, 2, and 3
1 only
2 only
3 only
1 and 2
Explanation
If we are in the inelastic portion of the demand curve, an increase in price will increase TR, since the price effect is greater than the quantity effect. Quantity will still decrease.
Which of the following is true of the relationship between the demand curve and the marginal revenue curve in a monopolistic structure?
The demand curve is always greater than or equal to the marginal revenue curve.
The demand curve is always less than or equal to the marginal revenue curve.
The demand curve is always greater than the marginal revenue curve.
The demand curve is always equal to the marginal revenue curve.
The marginal revenue curve decreases while the demand curve increases.
Explanation
A monopolist faces a downward sloping demand curve, indicating market power, in contrast to the horizontal demand curve faced by perfectly competitive firms. A monopolist faces a downward sloping marginal revenue curve as well.
The monopolist's marginal revenue curve has the same y-intercept (intercept on the price-axis) as the demand curve, but has a steeper slope. Therefore, the demand curve is always equal to (at the intercept) or greater than (everywhere after the intercept) the marginal revenue curve. Answer choice "The demand curve is always greater than or equal to the marginal revenue curve" is correct.
The other answer choices are distortions of this relationship.
Use the following graph for questions 9 - 11
Increasing the price of oranges at point D will result in:
- An increase in total revenue
- A decrease in quantity demanded
- Movement toward a portion of the demand curve that is more elastic
1, 2, and 3
1 only
2 only
3 only
1 and 2
Explanation
If we are in the inelastic portion of the demand curve, an increase in price will increase TR, since the price effect is greater than the quantity effect. Quantity will still decrease.
Which of the following is true of the relationship between the demand curve and the marginal revenue curve in a monopolistic structure?
The demand curve is always greater than or equal to the marginal revenue curve.
The demand curve is always less than or equal to the marginal revenue curve.
The demand curve is always greater than the marginal revenue curve.
The demand curve is always equal to the marginal revenue curve.
The marginal revenue curve decreases while the demand curve increases.
Explanation
A monopolist faces a downward sloping demand curve, indicating market power, in contrast to the horizontal demand curve faced by perfectly competitive firms. A monopolist faces a downward sloping marginal revenue curve as well.
The monopolist's marginal revenue curve has the same y-intercept (intercept on the price-axis) as the demand curve, but has a steeper slope. Therefore, the demand curve is always equal to (at the intercept) or greater than (everywhere after the intercept) the marginal revenue curve. Answer choice "The demand curve is always greater than or equal to the marginal revenue curve" is correct.
The other answer choices are distortions of this relationship.
Suppose that the price of Good Y increases by 5%. If the quantity supplied of Good Y remains constant, then the price elasticity of supply of Good Y is .
less than 0.
greater than 1.
impossible to determine from the information given.
Explanation
Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.
The demand for oranges at point D is:
Inelastic
Perfectly elastic
Elastic
Unit elastic
Perfectly inelastic
Explanation
For a demand curve, the upper left portion is elastic, the middle portion is unit elastic and the lower right portion is inelastic. You can confirm by calculating E = percent change in quantity/ percent change in price between the points on the lower right portion of the demand curve. If E < 1, then demand is inelastic.