Question

Price elasticity of demand is a measure of how responsive a change in quantity demanded is to a change in:

Question 32 options:

	interest rate.
	price.
	consumer preferences.
	supply.

Question 33 (10 points)

The _______ is the amount by which an additional unit of activity increases its cost.

Question 33 options:

	average cost.
	marginal benefit.
	marginal cost.
	average profit.

Question 34 (10 points)

The Inverse Elasticity Rule states:

Question 34 options:

	the lower the elasticity, the lower the price.
	the higher the elasticity, the higher the price.
	the higher the elasticity, the lower the price.
	the higher the elasticity, the lower the quantity.

Question 35 (10 points)

The implicit cost of capital is:

Question 35 options:

	depreciation.
	the opportunity cost of the capital used by a business.
	the explicit cost of capital that the firm might have used but didn't need to.
	the cost of human capital.

Answer 1

1> Price

Price elasticity is defined as the respositveness of quantity with price.

2> marginal cost.

Marginal cost is the increase in cost due to an additional unit of output.

3>  the higher the elasticity, the lower the price.

If the elasticity is higher, then the seller can not charge high as the consumers will consume less if they are charged high.

4>  the opportunity cost of the capital used by a business

The implicit cost is not done explicitly, thus the benefit foregone due to the current outcome, the opp. cost of capital would be the implicit cost of capital by the business