Economics - Study Mode

[#266] A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is
Correct Answer

(B) Infinite

Explanation

Solution: A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is Infinite. The horizontal supply curve shows another extreme case, i.e., that of perfectly inelastic supply. The implication of such a supply curve is that a little price cut will cause the quantity supplied to fall to zero while a slightest increase in price will induce purchasers to offer an infinitely large quantity.

[#267] When ______, we know that the firms are earning just normal profits.
Correct Answer

(A) AC = AR

Explanation

Solution: When AC = AR, we know that the firms are earning just normal profits.

[#268] The economic analysis expects the consumer to behave in a manner which is
Correct Answer

(A) Rational

Explanation

Solution: The economic analysis expects the consumer to behave in a manner which is Rational. The assumption of rational behavior implies that people would rather be better off than worse off. Most conventional economic theories are based on the assumption that all individuals taking part in an action or activity are behaving rationally.

[#269] Consumer surplus is highest in case of
Correct Answer

(A) Necessities

Explanation

Solution: Consumer surplus is highest in case of necessities. Consumer surplus happens when the price that consumers pay for a product or service is less than the price they're willing to pay.

[#270] The vertical difference between TVC and TC is equal to
Correct Answer

(C) TFC

Explanation

Solution: The vertical difference between TVC and TC is equal to TFC.