Question 5 The following are correct description for special cases of Linear Dem

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Question 5

The following are correct description for special cases of Linear Demand, EXCEPT:

Question 5 options:

A. A linear demand has price elasticities that range from zero to plus infinity.

B. In the Linear Demand, the upper portion of the demand is Elastic.

C. The Linear Demand has Elasticity equal to one an the point where the Marginal Revenue equals ONE.

D. For a Linear Demand, revenue is maximized when Price Elasticity equals ONE.

Question 6

If a Cobb-Douglas Demand has price elasticity equals to one in absolute terms, it means:

Question 6 options:

A. Quantity will always change in one percent point for any given percentage change in price.

B. Consumption will increase in the same proportion as the increase in price.

C. Total Revenue will stay the same even if price increases or decreases

D. Total Revenue will always increase in one percent if price increases in one percentage point.

Question 7

Based on the Consumer's Theory Model, the following are proper description of the optimal allocation of consumption (X,Y), EXCEPT:

Question 7 options:

A. Is the point where the consumer maximizes utility given the budget constraint.

B. Is the point where the budget constraint intersects an indifference curve.

C. Is the point where the budget constraint makes tangency with the highest attainable indifference curve.

D. The optimal allocation is unique for any given budget constraint.

Question 8

The following are correct descriptions about a Price Ceiling, EXCEPT:

Question 8 options:

A. Is the regulated price imposed below the market price that would prevail in equilibrium.

B. A price ceiling will create an excess of supply.

C. A price ceiling will reduce producer's surplus if the regulated price prevails.

D. A price ceiling could lead to an increase in producer's surplus, if a black market emerges.

A. A linear demand has price elasticities that range from zero to plus infinity.

B. In the Linear Demand, the upper portion of the demand is Elastic.

C. The Linear Demand has Elasticity equal to one an the point where the Marginal Revenue equals ONE.

D. For a Linear Demand, revenue is maximized when Price Elasticity equals ONE.

Question 6

If a Cobb-Douglas Demand has price elasticity equals to one in absolute terms, it means:

Question 6 options:

A. Quantity will always change in one percent point for any given percentage change in price.

B. Consumption will increase in the same proportion as the increase in price.

C. Total Revenue will stay the same even if price increases or decreases

D. Total Revenue will always increase in one percent if price increases in one percentage point.

Question 7

Based on the Consumer's Theory Model, the following are proper description of the optimal allocation of consumption (X,Y), EXCEPT:

Question 7 options:

A. Is the point where the consumer maximizes utility given the budget constraint.

B. Is the point where the budget constraint intersects an indifference curve.

C. Is the point where the budget constraint makes tangency with the highest attainable indifference curve.

D. The optimal allocation is unique for any given budget constraint.

Question 8

The following are correct descriptions about a Price Ceiling, EXCEPT:

Question 8 options:

A. Is the regulated price imposed below the market price that would prevail in equilibrium.

B. A price ceiling will create an excess of supply.

C. A price ceiling will reduce producer's surplus if the regulated price prevails.

D. A price ceiling could lead to an increase in producer's surplus, if a black market emerges.

Explanation / Answer

5)The following are correct descriptions for special cases of linear demand

Except Option (C) The linear demand has elasticity equal to one on the point where marginal revenue equals one.

The price elasticity of demand measures the responsiveness of precentage change quantity demanded to a percentage change in its price.The marginal revenue is the difference in total revenue. When the linear demand has elasticity equal to 1 which is termed as unitary elasticity,then it means that the total revenue is not affected by the changes in price and it will remain same whether the price increases or decreaases so, the Marginal Revenue is equal to zero at this point.

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