Question

3) Suppose Frank chooses to buy hot dogs at their current price. When the price of hot dogs increases, Frank's consumer surplus

a) increases

b) decreases

c) doesn’t change

d) cannot be determined unless the size of the price increases is known

4) An individual's income increases by 50% and their demand for fast food falls by 10%. Calculate their income elasticity of demand for fast food. Please round to one decimal place

5) Rising average product as inputs increase means that which of the following is happening to costs?

a) average costs alone are falling

b) marginal costs alone are falling

c) average costs and marginal costs are rising

d) average costs and marginal costs are falling

e) average costs alone are rising

Answer 1

3 : Option B is correct. Frank's hot dog price has been increased which resulted in consumer surplus decreases because now Frank has paid more for hot dog they have eaten.

4 : Income elasticity of demand is the responsiveness of percentage change in quantity demanded with percentage change in income.

E_d = % Change in quantity demanded /%Change in income = - 10%/50% =-1/5= -0.2

5 :Option A is correct. Rising average product input increase means that average cost are falling because as average fixed cost has been start declining which resulted in declining in average variable cost.