MiCRO Doubtssss

[SoniaKapoor]

q1 Which one of the following would most likely increase the demand for coffee?
a. a decrease in consumer income
b. a decrease in the price of coffee
c. an increase in the price of tea, a close substitute
d. a drought in the coffee-producing regions of Brazil


q2 A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to
a. spend more on sugar.
b. spend less on sugar.
c. spend the same amount on sugar.
d. consume more goods like coffee and tea that are complements of sugar

q3 If marginal cost exceeds marginal revenue, a price-taker firm should
 a. expand output.
 b. reduce output.
 c. lower its price.
 d. Both a and c are correct.

[bhavya jain]

1) c
2) a
3) a

[The Villain]

Should't the ans to quest 3 be c...

[L14]

Ron are u sure, I think the answer for 3 is b.  lowering the price means expanding output which will result in loss.
I don't get qn 2. dp/p=0.1, dq/q=0.05 .how do u find the answer from this??

[Granpa Simpson]

The answer to Q3 i guess will b...if in this region the firm expands output its profits will decrease as the cost of producing an extra unit will be greater than the revenue earned from that extra unit...also a price taker firm cannot change the prices...while if if he reduces output it can be feasible...!!!!

[SoniaKapoor]

Thanku bhavya,ron and ben.