Question

10. The demand curve of a perfectly competitive industry is horizontal.

Group of answer choices

True

False

11. A firm decided to increase its price by 10%. It noticed that its sales (measured in number of units) decreased by 8%. The firm’s price elasticity of demand is _______ (in absolute value) and this means the demand for the good is _______.

Group of answer choices

0.8, inelastic

1.25, inelastic

1.25, elastic

0.8, elastic

12. In the sales maximization model of oligopoly, firms produce up to the output where marginal revenue equals zero.

Group of answer choices

True

False

Answer 1

10.True

Demand curve of a perfectly competitive  industry is horizontal.

11.A) 0.8 , inelastic

When a firm decided to increase its price by 10% .and its sales decreased by 8% then

Price elasticity of demand =

% change in quantity demand ÷ % change in prices

= -  8% ÷ 10%

= - 0.8%

It is less then 1 hence its inelastic demand.

12) false

In oligopoly sales can increase upto the point of profit maximization where marginal cost equals marginal revenue.