Question

True or False:
a) when the price of a good changes, whether total rises or fall depend on the price elasticity of demand for the good.
b) If a tax imposed on sellers, the tax is actually bored only by the sellers.
c) A negative externality exists when a consumer's (or a producer's) optimal choice imposes its external costs on other pepole .
d) The short-run is the time period for which firms cannot adjust the amounts of labor and capital.
e) To reach the consumer optimum, each consumer must allocate his/her given income into goods and services in a way that makes all marginal utilities per dolloar equal.

Answer 1

1. The total revenue is dependent on the elasticity of demand. That is if the price elasticity is inelastic then an increase in price means rise in Total Revenue. While in case of Elastic demand an increase in price means fall in Total Revenue. True.

2. False. Because tax burden is divided amongst the buyer as well as sellers.

3. True

A factory dumps the waste in a river which harms the nearby locality, the cost of which has to be borne by the locals not by the firm.

4. In short run only one factor of production is variable while in the long run all the factor of production is variable. False

5. True. According to Law of Equimarginal Utility the above statement is true.

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