Econ
(Figure: Computing Monopoly Profit) Look at the figure Computing Monopoly Profit. At the profit-maximizing output, total cost is:
FQ2 P20QF. P10QG. P30QE.
Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, producer surplus will be:
$0. $180. $100. $40.
(Figure: Wireless Mouse Market) Look at the figure Wireless Mouse Market. Calculate the change in producer surplus when the price increases from $10 to $15.
$1,000 $625 $250 $1,125
Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases two mixers and bakes 200 cakes per day, what is her average fixed cost?
$187.50 $300,000 $1,508 $7.50
(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fourth sweatshirt is:
$20. $9. $15. $24.
Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, the store's accounting profit equaled:
$200,000. $100,000. $50,000. $10,000.
Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is Mark's individual consumer surplus?
$25 $35 $10 $75
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.
$5,000; $9,000 $3,000; $5,000 $9,000; $12,000 $9,000; $5,000
(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. The maximum total surplus for the market is _____, and it occurs at a price equal to _____.
$550; $1.50 $600; $1.50 $1,050; $2 Not enough information is provided to answer this question, since the maximum total surplus could occur anywhere.
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly, and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets but Ray continues to sell 200 gadgets, Ray's profits will be:
$600. $400. $1,400. $1,250.
Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.
$7.84; $11.76; $19.60 $5.33; $13.33; $18.67 $133.33; $200.00; $333.33 $400.00; $600.00; $1,000.00
(Table: Cost Data) Look at the table Cost Data. The average variable cost of producing 2 purses is:
$70. $35. $190. $50.
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MCfor the provision of the cable is $5 a week. There are no fixed costs. Reference: Ref 13-23 (Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist. If the company is allowed to offer different prices for its good, what is the maximum amount of profit this company can earn?
$750 $1,000 $1,520 $1,375
(Table: Marginal Analysis of Sweatshirt Production I) Look at the table Marginal Analysis of Sweatshirt Production I. The profit at the optimal quantity of sweatshirts is:
$8. $45. $12. $70.
(Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:
$82. $108. $17. $408.
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Irvine, Kentucky. If the price of burgers falls from $1.50 to $1.00, there is a loss in producer surplus. How much of the loss accrues because of the change in the quantity supplied?
$90 $45 $50 $75
(Figure: Revenues, Costs, and Profits for Tomato Producers) Look at the figure Revenues, Costs, and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. At the profit-maximizing quantity of output in the figure, the farmer's total revenue is _____, total cost is _____, and profit is _____.
$90; $14; $76 $90; $70; $20 $48; $56; -$8 $30; $42; -$12
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. The marginal utility she derives from the sixth serving she eats is:
-15. 25. -25. 0.
(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21, by the midpoint method, is approximately:
0.49. 4.9. 0.21. 2.1.
Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The price of a book is $5 and the price of a pencil is $0.50. The equation for Adam's daily budget constraint can be written as:
0.50(B) + 20(P) ≤ 5 20(B) + 0.50(P) ≤ 5 5(B) + 0.50(P) ≤ 20 0.50(B) + 5(P) ≤ 20
(Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is perfectly competitive. If the market price of a bushel of tomatoes is $8, in the short run the farmer's profit-maximizing output is _____ bushels.
1 2 0 3
An industry is made up of five firms. Three of the firms make up 20% of the total market sales, one firm makes up 25%, and the remaining firm makes up 15%. What is the HHI for this industry?
1,800 100 1,200 2,050
Joan loves sushi. Her first piece of sushi normally gives her a marginal benefit of $5. Each additional piece yields a marginal benefit that declines by $0.25 per piece. If her favorite sushi bar charges $2.75 per piece of sushi, how many pieces should she eat?
10 8 11 5
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $10 to spend on both goods. The maximum number of boxes of popcorn that you can purchase is:
10. 5. 20. 40.
(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. The opportunity (or marginal) cost in terms of your accounting score of spending the first hour studying economics is _____ points.
15 5 0 10
(Table: Production of Bagels) Look at the table Production of Bagels. The marginal product of the third worker is _____ bagels.
15,000 10,000 9,000 12,000
(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. Assuming that Hal spends all of his income on honey and milk, the combination of milk and honey that will maximize his total utility is _____ jars of honey and _____ gallons of milk
1; 6 8; 8 2; 4 3; 2
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. How many hats should the Saints produce, and what price should the organization charge to maximize its profits?
2; $26 3; $24 4; $22 1; $28
(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that goods X and Y both cost $1 per unit and you have $7 to spend on both goods. To maximize utility, you would consume _____ units of X and _____ units of Y.
2; 5 3; 4 4; 3 5; 2
(Table: Marginal Utility per Dollar IV) Look at the table Marginal Utility per Dollar IV. If Ashyra has $40 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.
2; 6 2; 5 3; 4 1; 8
(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product for three workers is _____ bushels.
39 15 45 51
Abdul spends all of his income on food (F) and shelter (S). His budget line is given by the equation 5F + 20S = 100. Which of the following consumption bundles is part of his consumption possibilities?
8 units of F and 3 units of S 0 units of F and 6 units of S 14 units of F and 2 units of S 20 units of F and 15 units of S
If the inverse demand function for notebooks is p = 50 - 1/3Q, what is the consumer surplus if equilibrium price is $25?
A. $3,750 B. $1,875 C. $312.5 D. $937.5
Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:
ATC3. ATC1. ATC2. ATC1 or ATC2.
(Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If coconuts are a normal good and the income level of consumers falls, it will be represented in the figure as a movement from:
B to A. C to A. E to B. A to C.
Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. Suppose that after one month, the cable providers follow a tit-for-tat strategy. Eventually they will achieve a tacit collusive equilibrium at which:
CableNorth sets a low price and earns $130,000 per month and CableSouth sets a high price and earns $80,000 per month. both firms set a high price and each earns $100,000 per month. both firms set a low price and each earns $90,000 per month. CableNorth sets a high price and earns $80,000 per month and CableSouth sets a low price and earns $130,000 per month.
_____ almost always take the market price as given—that is, are considered _____—but this is often not true of _____.
Consumers and producers; price takers; firms that produce a differentiated product Consumers; quantity minimizers; producers Producers; quantity takers; consumers Producers; price searchers; consumers
An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. There will be an increase in both the equilibrium price and quantity. There will be a decrease in both equilibrium price and quantity.
In which of the following situations does overt collusion take place?
Firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits. Competition among a large number of small firms generates a stable market price. Competition among a large number of small firms generates similar but slightly different prices. Smaller firms in an industry have an unspoken agreement to charge the same price as the largest firm.
(Figure: Monopoly Model) Look at the figure Monopoly Model. When the firm is in equilibrium (that is, maximizing its economic profit), its profit is the area of rectangle:
IPDH. ISBH. SPDB. 0PDJ.
Which of the following is TRUE?
Instead of applying the marginal decision rule, monopoly firms just set the price as high as possible If demand is downward-sloping, P > MR. If demand is downward-sloping, P = MR. If demand is downward-sloping, P = ATC.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $145, which player will purchase sneakers?
Jamichael Rudy Ray Corey
Suzy knows she has maximized her utility because she is on her budget constraint and:
MUCameras = MUCoffee. what she spends on cameras equals what she spends on coffee. MUCameras / PCameras = MUCoffee / PCoffee. her consumption of cameras equals her consumption of coffee.
If a consumer derives more utility by spending an additional $1 on good X rather than on good Y:
MUx / Px = MUy / Py. MUx / Px < MUy / Py. MUx / Px > MUy / Py. Px / MUx > Py / MUy.
In the short run, a perfectly competitive firm produces output and earns an economic profit if:
P < MC. P > ATC. P = ATC. P < ATC.
A perfectly competitive industry is in a state of long-run equilibrium. Which of the following must be TRUE?
P = MR = MC > ATC. P = MR = MC = ATC. P = MR = MC < AVC. P > MR = MC = AVC.
(Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly shows how an industry consisting of two firms that face identical demand curves (D1) can collude to increase profits. The market demand curve is D2. Which of the following assumptions is part of the analysis illustrated by the model?
The MR curve is not relevant to either firm's choices. The two firms have identical marginal cost but different average total cost. The two firms sell differentiated products. The firms can act as a cartel and maximize their combined economic profit.
A price below the equilibrium price will cause a reduction in consumer surplus.
True False
A competitive market occurs when there are many buyers and sellers of the same good.
True False
An unwritten, unspoken agreement through which firms limit competition among themselves is called:
a cartel. overt collusion. satisfying. tacit collusion.
A monopoly is an industry structure characterized by:
a product with many close substitutes. a large number of small firms. barriers to entry and exit. a single buyer and several sellers.
An ambiguous change in price and a decrease in quantity are most likely caused by:
a shift to the left in supply and a shift to the left in demand. a shift to the left in supply and a shift to the right in demand. a shift to the right in supply and a shift to the left in demand. no shift in supply and a shift to the left in demand.
Antitrust policy refers to government:
attempts to prevent the acquisition of monopoly power. attempts to encourage the exercise of monopoly power. attempts to limit private enterprise. encouragement of collusion in the marketplace.
(Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is perfectly competitive. The farm's short-run supply curve is the _____ cost curve above a price of _____.
average total; $14 average variable; $10 marginal; $14 marginal; $10
In the classic prisoners' dilemma with two accomplices in crime, the Nash equilibrium is for:
both to confess. one to confess and the other not to confess. This game does not have a Nash equilibrium. neither to confess.
Lucy bought some stock 10 years ago that has been priced at half of her purchase price for the past 5 years. However, Lucy refuses to sell the stock, thinking that if she waits long enough, she will recover her investment. What type of behavior does this represent?
bounded rationality risk aversion mental accounting loss aversion
An "either-or" decision entails:
calculating the marginal benefits for each activity. a choice between two activities. deciding how much of an activity to do. calculating marginal costs for each activity.
If a perfectly competitive firm is producing a quantity where P = MC, then profit:
can be increased by increasing production. can be increased by decreasing the price. can be increased by decreasing the quantity. is maximized.
Suppose the GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect the _____ to increase and _____ to decrease after the breakup.
consumer surplus and total surplus; producer surplus producer surplus and total surplus; consumer surplus producer surplus; consumer surplus and total surplus consumer surplus; producer surplus and total surplus
The relation between an individual's consumption bundle and her satisfaction is called a _____ function.
consumption production demand utility
A decrease in a consumer's income will do all of the following EXCEPT:
decrease the horizontal intercept. decrease the vertical intercept. shift the budget line away from the origin. reduce the individual's consumption possibilities.
Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _____ in _____ surplus.
decrease; producer increase; producer increase; consumer increase; total
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
duopoly. price war. dominant producer. cartel.
Higher indifference curves represent _____ lower curves.
either more or less utility than the same utility as more utility than less utility than
(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. Demand is price _____ between $20 and $21, since total revenue _____ when the price _____.
elastic; decreases; increases inelastic; increases; increases inelastic; stays the same; decreases elastic; increases; decreases
If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
encourage other firms to enter the industry. continue to produce at an economic loss. earn an economic profit. produce more than the profit-maximizing quantity.
(Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. If the price of good Z is $15, there will be:
excess demand of 25 units. a surplus of 45 units. a shortage of 20 units. excess supply of 25 units.
(Table: Cherry Farm) Look at the table Cherry Farm. If the price is $6 per pound:
firms will enter the industry. firms will exit the industry. the industry is in long-run equilibrium. the industry has minimized average total cost.
Joseph is consuming three units of pizza and two units of soda. The price of pizza is $5 and the price of soda is $1. If he is consuming the optimal consumption bundle and his marginal utility of the third unit of pizza is 50, his marginal utility of the second soda is:
impossible to determine unless you know Joseph's income. 50. 5. 10.
(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:
increase, as the price effect dominates the quantity effect. stay the same, but the price effect is dominated by the quantity effect. stay the same, as both the price and quantity effects remain unchanged. decrease, as the price effect is dominated by the quantity effect.
At the profit-maximizing level of production, a perfectly competitive industry will produce an _____ level of production, and a monopolist produces an _____ level of production.
inefficient; efficient efficient; efficient efficient; inefficient inefficient; inefficient
If quantity supplied responds substantially to a relatively small change in price, supply is:
insensitive to changes in price. price-inelastic. negatively sloped price-elastic.
Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price discrimination strategy would lead to _____ prices for men and _____ prices for women _____.
lower; higher; in any circumstances lower; lower; in any circumstances lower; higher; as long as men can't resell drinks to women higher; lower; as long as women can't resell drinks to men
Assuming that diminishing marginal utility applies to both goods, if a consumer buys more plastic bins and fewer door hooks, the _____ of plastic bins will _____, and the _____ of door hooks will _____.
marginal utility; rise; marginal utility; fall marginal utility; fall; marginal utility; rise total utility; fall; marginal utility; rise marginal utility; rise; total utility; rise
For Domingo, the optimum consumption bundle is the one that _____ his _____, given his budget constraint.
minimizes; utility maximizes; utility maximizes; opportunity cost minimizes; opportunity cost
Assume that diminishing marginal utility applies to both coffee and football tickets and that the consumer is spending all of her income. If a consumer purchases a combination of coffee and football tickets such that MUCoffee/ / PCoffee = 20 and MUFootball tickets/ / PFootball tickets = 10, to maximize utility, the consumer should buy _____ coffee and _____ football tickets.
more; more less; more more; fewer less; fewer
The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61. If the price of Pepsi falls by 10%, all other things unchanged, the quantity demanded of Coke will:
not change, because many people prefer Coke to Pepsi. decrease by less than 6.1%. rise. decrease by 6.1%.
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At the equilibrium price and quantity, Ben buys _____ pumpkins, and his consumer surplus is _____.
one; $3 two; $4 three; $6 four; $2
The substitution effect always entails a change in consumption in the _____ direction as (of) the change in _____.
opposite; price same; price opposite; the budget same; marginal utility
(Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for used furniture, an inferior good?
panel B panel D panel C panel A
(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for big-screen televisions, a normal good?
panel D panel A panel B panel C
Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For Gehrig and Gabriel, the dominant strategy is to:
produce between 5,000 and 7,000 figurines. produce 7,000 figurines. produce 5,000 figurines. collude and increase production to more than 14,000 figurines.
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4, the firm will produce quantity _____ and _____ in the short run.
q1; break even q5; lose fixed costs q3; make a profit q4; break even
If demand is elastic, the _____ effect dominates the _____ effect, and a(n) _____ in price will cause total revenue to rise.
quantity; price; decrease quantity; price; increase. price; quantity; decrease price; quantity; increase
The principle of diminishing marginal utility:
refers to the tendency of total utility to increase until an individual's budget is no longer constrained. indicates that if a good is inferior, less of it will be purchased when income falls refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases. assumes all goods are normal.
If the absolute value of the price elasticity of demand is greater than 1:
small percentage changes in the price will lead to much larger percentage changes in the quantity demanded. small percentage changes in the price will lead to even smaller changes in the percentage change in the quantity demanded. changes in the price will have no impact on changes in the quantity demanded. percentage changes in the price will lead to equal percentage changes in the quantity demanded.
For which of the following decisions would marginal analysis be relevant?
spending $1,000 on a summer vacation or on painting your house eating dinner at home or going out to a restaurant for dinner buying a new car or a second-hand car deciding how much to spend on a summer vacation
Economists describe the satisfaction consumers receive from consuming goods and services as:
substitution effects. income effects. budget constraints utility.
(Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs. More time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC). At four hours of study, Claudia will maximize her benefit from study time because:
the difference between total benefits and total costs is maximized. MB = 20 and MC = 5. sunk costs are minimized. MB > MC.
The market for soybeans is initially in equilibrium. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that:
the equilibrium price of soybeans will rise, but we can't determine what will happen to the equilibrium quantity. the equilibrium price and quantity of soybeans will rise. the equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium price. the equilibrium price and quantity of soybeans will fall.
Look at the figure Short-Run Costs II. Curve 1 crosses the average variable cost curve at:
the minimum value of curve 2. 3 units of output. the level of output at which diminishing marginal returns begin. approximately 5.3 units of output.
People are willing to buy insurance because of:
the miscalculation of opportunity costs. bounded rationality. risk aversion. the status quo.
A consumer's willingness to pay depends on:
the size of the shortage of the good or service. the expected additional benefit of consuming the good or service. the cost of producing the good or service. the size of the surplus of the good or service.
The demand curve for a normal good will always slope downward because:
the substitution effect and the income effect reinforce each other, and the income effect always displays an inverse relation between price and quantity demanded. even though the substitution effect and the income effect move in opposite directions, the substitution effect dominates, and it always displays an inverse relation between price and quantity demanded. the substitution effect and the income effect reinforce each other, and the substitution effect always displays an inverse relation between price and quantity demanded. even though the substitution effect and the income effect move in opposite directions, the income effect dominates, and it always displays an inverse relation between price and quantity demanded.
Figure: The Unknown Curve) Look at the figure The Unknown Curve. You are a cabinetmaker. You employ several workers to produce kitchen and bathroom cabinets. Your summer intern has drawn a graph showing a relationship between the number of cabinetmakers you employ and the number of cabinets produced. Unfortunately, your intern has failed to identify this curve. It is likely to be the _____ curve:
total cost total variable cost marginal product total product
For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____ of photographs.
total cost; number average cost; number total cost; marginal product marginal cost; number
If a university decreases the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is:
unstable. price-elastic. price-inelastic. price unit-elastic.
The law of demand is illustrated by a demand curve that is:
vertical. horizontal. downward-sloping. upward-sloping.
Peanut butter and jelly are complements in consumption. Assuming that the supply curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly, producer surplus in the peanut butter market:
will not change. may change, but it is impossible to tell whether it will increase or decrease. will decrease. will increase.
If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:
zero elastic. price unit-elastic. price elastic. price inelastic.
