1. X and Y are substitute goods. X is put on sale "buy one get one...
1. X and Y are substitute goods. X is put on sale "buy one get one
free". This will lead to
A. an increase in quantity demanded of X
B. a decrease in demand for Y
C. a positive cross-price elasticity of X and Y
D. all of the above
2. Consumer's surplus is
A. demand price plus equilibrium price
B. supply price above market price
C. demand price plus supply price
D. demand price less equilibrium price
3. MR = MC=P holds for
A. all firms
B. monopoly
C. monopolistic competition
D. perfect competition
Homework Answers
1 - Option D
All the above
The substitute goods have positive cross prive elasticity , if the demand for one good will increase , demand for the other good will decrease. Hence all the options given are correct
2 - Option A
Demand price plus equlibrium price
This is because the consumer surplus always occurs above the equlibrium price and below the demand curve. It is not under the supply curve. The below equlibrium price area represents the producer surplus. Hence option A will be correct.
3 - Option D
Perfect competition
This is the profit maximisation condition for the perfect competition. In monopoly , the price is above MR. Thus only option D will be correct .
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