1. If the price of a movie rises 3 percent? and, as a? result, the quantity dema
ID: 1165939 • Letter: 1
Question
1. If the price of a movie rises 3 percent? and, as a? result, the quantity demanded of streamed videos increases 6? percent, then the cross elasticity of demand is
A. ??1/2.
B. 9.
C. ?2.
D. ?1/2.
E. 2.
2. If you know the cross ?price elasticity between two goods is? negative, then you know the goods are
A. inelastic goods.
B. normal goods.
C. substitutes.
D. complements.
E. inferior goods.
3. Marginal benefit curves
A. have negative slopes.
B. are horizontal lines.
C. are upside?down U?shaped curves.
D. have positive slopes.
E. are vertical lines.
4. Rent ceilings
A. create efficiency.
B. result in surpluses.
C. benefit producers.
D. increase search activity.
E. have no effect if they are set below the equilibrium rent.
Explanation / Answer
1. cross-price elasticity is the ratio of percentage change of quantity demanded and percentage change in the price of its substitute. The goods are stream videos and movies.
Here cross-price elasticity is 2
the correct option is E
2.
When cross-price elasticity is negative means goods are complements because for example when the price of petrol rises then the demand of cars fall as car and petrol are complementary goods.
the correct option is D
3.
Marginal benefit shows the law of diminishing returns which rises at the initial level of inputs employed but after a certain threshold start declining and the shape is inverted U shape
the correct option is C
4.
Rent ceiling leads to shortage and underproduction while it is effective when set below the equilibrium rent so it does not benefit producers but increases search activity to find houses below or at the rent ceiling level.
the correct option is D
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