Zero The rent the firm could earn if it rented the building to another firm The

Zero the rent the firm could earn if it rented the

This preview shows page 6 - 8 out of 8 pages.

Zero. The rent the firm could earn if it rented the building to another firm. The monthly mortgage payment the firm would have had to pay. OPPORTUNITY COST The opportunity cost of a particular choice is the satisfaction that would have been derived from the next best alternative foregone 24. If there is a price ceiling, there will be: Select correct option: Shortages. Surpluses. Equilibrium. None of the given options. Ref. page no 47 on book ,schaum’s outline of theory and problems…….. A price ceiling is a government-mandated that exists below the markete’s equilibrium price,price ceiling result in shortages. 25. If the supply of a product decreases and supply curve shifts leftward, and the demand for that product simultaneously increases and demand curve shifts rightward, then equilibrium: Select correct option: Price must rise. Price must fall. Quantity must rise. Quantity must fall. Ref. page no 34 on book ,schaum’s outline of theory and problems…….. Equilibrium prices is greater when the demand increases is greater than the increased in supply
Image of page 6
26. When the price of petrol rises by 8%, the quantity of petrol purchased falls by 6%. This shows that the demand for petrol is: Select correct option: Perfectly elastic. Unit elastic. Price elastic. Price inelastic. PЄd = Percentage change in Quantity Demanded Percentage change in Price = 6%/8% = 0.75<1 In the above figure, Elasticity for firm is equal to 0.75 ; it is less than 1 (ignoring minus sign) which shows that the demand curve is inelastic . 27. demand curve facing a perfectly competitive firm is: Select correct option: The same as the market demand curve. Downward-sloping and less flat than the market demand curve. Downward-sloping and more flat than the market demand curve. Perfectly horizontal. Page no.73 on handouts The demand (or AR) curve for the industry is downward sloping but for any individual perfectly competitive firm, is horizontal . 28. In economics, the “long run” is a time period in which: Select correct option: All inputs are variable. All inputs are paid for. All outputs are determined. All loans are repaid. Long run: a period of time in which all inputs in the production process is variable . 29. If the cross price elasticity of demand between two products is +3.5, then: Select correct option: One of the products is expensive and one is relatively inexpensive. One product is a normal good and the other is an inferior good.
Image of page 7
The two products are complements. The two products are substitutes . Page no.35 on handouts CROSS-PRICE ELASTICITY OF DEMAND Cross price elasticity of demand is the percentage change in quantity demanded of a specific good, withrespect to the percentage change in the price of another related good. Goods are substitutes (sign is positive). Demand is cross price elastic | є | > 1. 30. Which best expresses the law of demand? Select correct option: A higher price reduces demand. A lower price reduces demand. A higher price reduces quantity demanded. A lower price shifts the demand curve to the right. Page no.11 on handouts Law of demand: The law of demand states that if the price of a certain commodity rises, its quantity demanded will go down, and vice-versa
Image of page 8

You've reached the end of your free preview.

Want to read all 8 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture