a. The average-fixed-cost curve must eventually ri b. c. The marginal-cost curve

Question

a. The average-fixed-cost curve must eventually ri b. c. The marginal-cost curve eventually rises as output rises, curve when margin The average-total-cost curve intersects the marginal cos d. The average-total-cost curve is high when a small amoutnt minimumm lly rises as outprv whe average-variable-costs are high. 45. Which of the following best resembles a perfectly of output is produced because a. the smart phone market b. the banana market c. the soft drink market d. the tap water market tive market? 46. Market demand is given as O 220-4P. Market supply is given as C elasticity of demand if the price is $42? a. 1.20 b. 0.68 c. 4.95 d. 3.23 Qs=2P+40. What is the point Page 12

Explanation / Answer

46. P = 42

Q = 220 - 4(42) = 220 - 168 = 52

Q = 220 - 4P

dQ/dP = - 4

Elasticity of demand = P/Q x dQ/dP = 42/52 x (- 4) = - 168/52 = - 3.23

Negative sign shows inverse relationship between price and quantity demanded.

Answer is d) 3.23

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