Question

1.

The less sensitive quantity demanded is to a change in​ price, the

A.

closer the absolute price elasticity of demand is to one.

B.

smaller the absolute price elasticity of demand.

C.

smaller a change in price must be to induce a certain change in quantity demanded.

D.

greater the absolute price elasticity of demand.

2.

When increased demand raises the price of the​ product, the

A.

marginal revenue product will fall.

B.

sales will fall.

C.

marginal revenue product will also increase.

D.

marginal revenue product will remain unchanged.

3.

If labor is 20 percent of total costs in industry A and 70 percent in industry​ B, then other things​ equal, we would expect the elasticity of demand for labor to be

A.

the same in both industries.

B.

greater in industry B than in industry A.

C.

greater in industry A than in industry B.

D.

uncertain since no general relationship exists between cost shares and elasticities.

4.

The marginal cost to society of reducing pollution increases with the increased use of pollution abatement because

A.

of the diminishing returns from abatement.

B.

of the high cost of abatement.

C.

of the reduced demand for abatement.

D.

of the diminishing marginal utility of abatement.

Answer 1

ans 1 : option A ( SMALLER THE ABSOLUTE PRICE ELASTICITY OF DEMAND IS TO ONE)

ANS 2: OPTION B (SALES WILL FALL) Because the law of demand in microeconomics states that all other factors being equal, as the price of the goods or services increases , consumer demand for the good or services will decrease,and vice versa.

ANS3:OPTION D AS THE DEMAND ELASTICITY OF LABOUR DEPENDS ON VARIOUS FACTORS

1:LABOUR COSTS AS A % OF TOTAL COST

2:THE EASE AND COST OF FACTOR SUBSTITUTION

3:THE PRICE ELASTICITY OF DEMAND FOR THE FINAL OUTPUT PRODUCED BY THE BUSINESS

SINCE NO SUCH INFORMATION IS GIVEN IN THE QUES THEREFORE ITS NOT CERTAIN ABOUT THE DEMAND ELASTICITY OF LABOUR.

ANS 4:OPTION A( BECAUSE OF THE LAW OF DIMINISHING RETURNS)