QUESTION 19 Using the information from Kevin\'s first year in business, what is

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QUESTION 19 Using the information from Kevin's first year in business, what is his econormic proft? C. S20.000 d $85,000 QUESTION 20 amount produced O a market price of the e b number of dollars that must be spent to produce it c amount of resources that must be devoted to its production d amount of the other good that must be given up QUESTION 21 For a particular good a 2 percent increase in price causes a 12 percent decrease in quantity demanded Which of the following statements is most Iik.ely applicable to this good? O a. The good is a kxury o b. The relevant time horizon is short for this good The market for the good is brady defined |points Save QUESTION 22 When a tax is levied on a good, the buyers and sellers of the good share the burden a provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers c regardless of how the tax is levied

Explanation / Answer

19. The correct answer is: a) $0

Reason: economic profit =

Total Revenue- All explicit costs- all implicit costs

=150,000-85000-65000 =$0.

20. The correct answer is: d)

Reason: By definition, opportunity cost along a production possibility frontier is the number of one goods to be sacrificed to produce an additional amount of the other good.

21. The correct answer is: d)

Reason: here price elasticity = 12/2 =6 which is pretty high.

Option a is incorrect as luxury deals with income elasticity only.Option b is incorrect as under short horizon, elasticity is very low. Option c is incorrect as given no close substitute, the elasticity must be very low.Hence, d is the correct answer.

22. The correct answer is: c)

Reason: both buyers and sellers share the bunden of tax and the share of burden depends on their elasticity of demand and supply respectively.

Thanks!

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