eroplanes and motor overproduction of apples causes farmers\' incomes to fall. T
ID: 1140473 • Letter: E
Question
eroplanes and motor overproduction of apples causes farmers' incomes to fall. This is an example o 1.6 Perfectly elastic demand. o) Elastic demand. c) Unitary elasticity of demand. d) Inelastic demand. 7 Which one of the following statements is correct? If the price elasticity of the demand for ice cream is greater increase their total revenue by raising the price ofi a) than one, then the suppliers of ice cream can am. ce cre bi The price elasticity of demand stays the same at each point along a linear demand curve c) If a 10 per cent i ncrease in university fees results in a 5 per cent reduction in the quantity of university education demanded, then the demand for university education is price ela stic. d) If the price elasticity of the demand for bread is less than one, a decrease in the price of bread will lower the total revenue of the suppliers of bread. 1.8 Normal profit implies that: a) All factors employed are earning an amount equal to their opportunity costs. b) Firms are earning enough to cover all the costs of production. c) Price must be greater than average variable cost. d) All of the above. ns is R40 and the marginal cost it incurs is R35. In order to maximise profits, the firm should: a) Decrease its output if it is a perfectly competitive firm, but not necessarily if it is a monopolistic firm. b) Decrease its output if it is a monopolistic firm, but not necessarily if it is a perfectly competitive firm c) Increase its output irrespective of the type of firm it is. d) Decrease its output irrespective of the type of firm it is. 1.9 A firm finds that by producing and selling the last unit of its product, the marginal revenue it ear terisExplanation / Answer
Answer: 1.6. d. Inelastic demand. The inelastic demand along with the rightward shift of the supply curve results in such a fall in price that total income of the farmer decreases.
1.7. d. This is because as the price decreases the quantity will increase but by a lower proportion than decrease in price. This will cause reduction in total income.
1.8. d. All of the above. Normal profit is earned when the variable cost and fixed cost are covered, price is above average variable cost and all the factors are paid equal to their opportunity cost.
1.9. c. Increase its output irrespective of the type of the firm it is. The maximization condition is price = MC or MR=MC.
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