5. The price of a ont latr, hpular style of hoen inoresn fallen by 15 percent. s

Question

5. The price of a ont latr, hpular style of hoen inoresn fallen by 15 percent. shoe wasi the nunber of pa One of this style of shoes purchased had by ao percena h er of pairs thi The o one-month demand' ourve for this tyle of a. income elastie price elastic ncome inelastic d. price inelastic Use the diagran below to ansver the tollowing question Cos 6.In the diagram above, the vertical aistance betveen the average total cost curve and the average variable coat curve is the r suit oft average fixed cost to cos . b. marginal cost C. total fixed cost d. sunk cost 7· which of the following is not relevans to the long run? a. a rising marginal cost curve b. aU-shaped average total cost curze dimplicit costs A straight-1ine demand curve with a vety steep slope will have a fixed costs 8. coefficient of elasticity: a.greater than one ess than one equal to one that changes at every point along its entire length b. c. d. 9. Marginal cost is: a.- directly related to the marginal produet b. inversely related to the rArginal product c. directly related to the total product d. inversely related to the total product

Explanation / Answer

5) Option D

This is because elasticity value is = 15%/20% = -0.75. Since ed < 1, dOptemand is price inelastic

6) Option A

Note that TFC + TVC = TC. Hence TFC/Q + TVC/Q = TC/Q which nothing but AFC + AVC = ATC

7) Option C

This is because in the long run there are no fixed costs and all factors are variable which implies there is only variable cost

8) Option D

When demand is steeper, it implies the slope is large in value. But elasticity will be different because it varies with price and quantity

9) Option B

This is due to the fact that when one falls the other rises.

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