An increase in a monopolist’s average cost will lead to
A. a. an increase in price, as the monopolist passes on the price increase.
B. b. an increase in price only if marginal cost also increases.
C. c. a decrease in price as the monopolist needs to sell more in order to cover increased costs.
D. d. an increase in price only if the elasticity of demand is less than 1.0.
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Following an increase in income,
A. a. a consumer’s indifference curve will shift.
B. b. the slope of the budget line will increase.
C. c. individual demand curve will not shift.
D. d. the budget line will shift in a parallel fashion.
Suppose that the government imposes a business licence fee of $100 on all firms. Profit-maximizing firms that stay in business will respond to this tax by
A. a. raising prices to pay the tax.
B. b. cutting output to reduce costs.
C. c. lowering prices to stimulate sales.
D. d. doing nothing.
For an inferior good, the demand curve
A. a. must have a negative slope.
B. b. is likely to be horizontal.
C. c. must have a positive slope.
D. d. may have a positive slope.
The position and slope of the budget line are determined by
A. a. consumer’s income.
B. b. consumer’s preference.
C. c. consumer’s income and the prices of goods.
D. d. consumer’s income, preference, and the prices of goods.
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