The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist.
The socially optimal level of output is:
A. 10 units per day.
B. 4 units per day.
C. 5 units per day.
D. 8 units per day.
Answer: D
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The marginal propensity to save (MPS) is the
A) fraction of additional income that is saved. B) amount of saving that is later consumed. C) total amount of income that is saved. D) part of consumption spending that does not depend on income.
If the board of regents of a major state university system plans to raise tuition in order to increase revenues, the regents must believe student demand is
a. elastic. b. inelastic. c. of unitary elasticity. d. perfectly elastic.
A 3 percent increase in the price of tea causes a 6 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is:
A. -0.5 B. +0.5 C. -2.0 D. +2.0
Which statement is true about the demand curve in the graph above?
A. Demand is perfectly elastic.
B. Demand is perfectly inelastic.
C. Demand is less elastic at point X than at point Y.
D. Demand is less elastic at point Y than at point X.