16. Because the demand for wheat tends to be inelastic, what would the developme

Question

16. Because the demand for wheat tends to be inelastic, what would the development of a new, more productive hybrid wheat tend to do? a. increase the total revenue of wheat farmers b. decrease the total revenue of wheat farmers c. weaken the demand for wheat d. weaken the supply of wheat 17. As the number of firms change in an oligopoly market, what will it become? a. As the number of firms decreases, the market approaches a monopolistically competitive equilibrium b. As the number of firms decreases, the market approaches a socially optimal equilibrium. c. As the number of firms increases, the market approaches a competitive market equilibrium d. As the number of firms increases, the market approaches a monopoly market equilibrium.

Explanation / Answer

(16) (b)

Development of a more productive wheat will lower the cost of production, so farmers will raise output, increasing market supply and decreasing market price. Since demand is inelastic, a decrease in price will decrease total revenue.

(17) (c)

The higher (lower) the number of firms in the market, the more is the tendency of the market to approach a competitive (monopolistic) market structure.

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