EBK MICROECONOMICS: PRIVATE AND PUBLIC
16th Edition
ISBN: 8220103612142
Author: Gwartney
Publisher: Cengage Learning US
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Question
Chapter 7, Problem 1CQ
To determine
The relationship between
Expert Solution & Answer
Explanation of Solution
The effect of an increase in tuition revenue depends on the price elasticity of demand. Suppose, the degree of responsiveness is more elastic, then an increase in tuition will result in more revenues and this will change as the type of elasticity changes. Suppose, the price elasticity of demand for the courses offered by the Nowhere State University is inelastic, then the revenue will rise. If the price elasticity of demand for the courses offered by the Nowhere State University is elastic, then revenue will fall. Here, an increase in price makes a corresponding decline in the quantity demanded. If the elasticity of demand is unitary, then the revenue remains the same. This is because the unitary elastic demand makes a proportionate change in both the price and the quantity demand. If the price elasticity of demand were 1.2, means more elastic, then an increase in tuition price will reduce the revenues.
Economics Concept Introduction
Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of demand for a commodity, after a change in its price.
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2.) Using the line drawing
tool,
plot and label the isocost line.
Carefully follow the instructions above, and only draw the required objects.
FILL IN BLANK
d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology).
A cost-minimizing firm will be producing on
▼
The samedifferently slopedparallel
isocost line. The firm will use
▼
moresameless
labour and
▼
less
the same amount of
more
capital and produce on
▼
a higher point on the same
a lower point on the same
a lower
a higher
isoquant curve.
QK
Using the graph on the right, determine how the firm
should change the quantity of the production factors in
order to reduce the costs.
The firm that is producing at point A can reduce its costs
for producing 2000 units by employing
A. same capital and more labour.
B. less capital and more labour.
○ C. less capital and the same labour.
D. more capital and more labour.
OE. more capital and less labour.
C
A
B
Q =4000
Q = 2000
C
Isocost line
QL
PL
Suppose the price ratio
is the same along isocost
PK
lines A and B. In the figure at right, the difference between
isocost line A and isocost line B is that
A. the total cost is larger along B.
B. the total cost is larger along A.
OC. labour is relatively more expensive along A.
○ D. the level of output is lower along A.
OE. both capital and labour are relatively cheaper
along A.
Capital
B
Labour
Chapter 7 Solutions
EBK MICROECONOMICS: PRIVATE AND PUBLIC
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