QUESTION 10 A good with a supply generates no deadweight loss when taxed. D a. s

Question

QUESTION 10 A good with a supply generates no deadweight loss when taxed. D a. somewhat inelastc O b. somewhat elastic O c. slowly increasing O d. perfectly elastic e perfecty inelastic QUESTION 11 A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good is D a. unitary elastic O b. inelastic. O c. relatively price sensitive. O d. elastic O e. perfectly elastic. QUESTION 12 Because a product's demand for an input to its production depends on the decision to produce this product, i is called demand. O b. input O c. dependent o d. production O e. derived

Explanation / Answer

(10) (e)

The more (less) inelastic the demand or supply curve, the smaller (larger) is the deadweight loss. So, when supply (or demand) is perfectly inelastic, deadweight loss is zero.

(11) (b)

When demand is inelastic (elastic), increase in a good's price will increase (decrease) total revenue.

(12) (e)

A demand dependent on production decision is called derived demand.

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