Question

Firms are indifferent to changing prices when the price elasticity of demand is

a	inelastic.

b	perfectly elastic.

c

elastic.

d	perfectly inelastic.

e	unitary elastic.

Price gouging laws are an example of

a	a price ceiling.

b	prices to allow rationing to the highest bidder.

c	rules for keeping market prices low enough for buyers to afford the product.

d	rules to prevent a market shortage.

e	rules to prevent black market pricing.

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

a	In regions with the highest minimum wage, the minimum wage law is legally enforced; in regions with the lowest minimum wage, the law is not strongly enforced.

b	In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding.

c	In regions with the highest minimum wage, most of the jobs require low skills, and workers are not productive enough to get paid the higher wage.

d	In regions with the lowest minimum wage, most of the jobs require technical skills and no one works minimum-wage jobs.

e	In regions with the lowest minimum wage, the price control is binding; in the regions with the highest minimum wage, the price control is nonbinding.

Answer 1

1. Firms are indifferent to changing prices when the price elasticity of demand is unitary elastic, because in case of unitary elastic demand the price change doesn't make any change in total revenue of firm .

So, the correct answer is an option (e).

2. Price gouging laws are an example of a price ceiling.

So, the correct answer is an option (a).

3. In regions with the lowest minimum wage the price control is non binding and in the regions with the highest minimum wage price control is binding.

So, the correct answer is an option (b).