6. If ESU students are willing to pay $60 for a broadband straight-talk plan, bu

Question

6. If ESU students are willing to pay $60 for a broadband straight-talk plan, but actually 7. If a cross-price elasticity coefficient is negative, the two goods considered must be: 8. pay $30 for a two-month straight-talk plan, their consumer surplus will be: (a) $40 (b) $20 (c) $10 (d) $30 (A) Substitute goods (B) Complementary goods (C) Inferior goods (D) Normal goods To protect consumers, policy makers usually set price floor. (A) True (B) False If marginal utility is positive and falling, total utility must be: (A) Negative and increasing (B) Positive and increasing (C) Decreasing and negative (D) constant 9.

Explanation / Answer

Question number 6 correct answer is option d. Consumer surplus is the difference between the reservation price of the maximum willingness to pay and the price actually paid by the consumer. Here the willingness to pay is $60 while actual payment is made for $30 so the consumer surplus is a $60 - $30 which is $30.

Question number 7 correct option is option B. Cross price elasticity measures the response of quantity demanded of a product to a change in price of its related good which is generally substitute for complement. When price of one good Falls its quantity demanded increase his and so the quantity of its substitute will fall and that of complement will rise. Therefore cross price elasticity for compliment should be negative. Therefore cross price elasticity for complement should be negative because fall in the price of other good will increase its quantity demanded.

Question number 8 correct choice is false. Price floor is kind of price control mechanism for sellers so that it sets the minimum price that the buyer must pay to purchase a good. Because it increases the price paid by the consumers it is not good for consumers but for sellers.

Question number 9 option B is correct. when the marginal utility is falling total utility increases at a decreasing rate which means it remains positive and it is increasing but at a decreasing rate.

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