22. whichor ehe tollowi ng representa a legitinate exception to the law o demand

Question

22. whichor ehe tollowi ng representa a legitinate exception to the law o demand? a reduction in the quantiey demanded in the face ot PEL a. b. prestige goods (o.g., caviar or toila Royee autadution in the raductiona utonobiles) o reduction in the quantity ded despite a price of the cood because the uhiity none of the above a d. Use the diagzan below to ansver the tollowing tvo questiona. 23. In the diagzam above, total revenue would be maxinized by setting the price equal to point b. B d. D 24. In the diagras above, D represents a point on the demand curve where a. demand it infinitely elastic b. the coeff.cient of elasticlty isequal to -1 c. the desani is inelastic a.the coefficient of elaattalty ia greater than -1 25. The zelationsip between the marginal.cost curve and average total cost curve is such that: a. the marg ral cost curve is alwaya above the average total cost b. the avezige total cost curve is always above the narginal cost o. the narginal cost curve cuts through the average total cost curve d. tbe marginal cost curve always cuts through the average total curve curve only when the average total cost curve is rising cost cuive at the low point on the average total cost

Explanation / Answer

1) Which of the following represents a legitimate exception to the law of demand?

Solution: prestige goods (e.g., caviar or Rolls Royce automobiles)

Explanation: Giffen goods or Inferior goods; and prestige goods represents a legitimate exception to the law of demand

2) In the diagram above, total revenue would be maximised by setting the price equal to point:

Solution: C

Explanation: The total revenue will be maximized at the midpoint which is the unit elastic point.

3) In the diagram above, D represents a point on the point curve where

Solution: demand co-efficient is equal to -1

Explanation: Price elasticity of Demand coefficient = percentage change in quantity demanded/percentage change in price = -1

4) The relationship between the marginal cost curve and average total cost curve is such that

Solution: the marginal cost curve always cuts through the average cost curve at the low point on the average total cost curve

Explanation: The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost

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