If a 5 per cent decrease in Qantas airfares causes a 15 per cent increase in the
ID: 1233706 • Letter: I
Question
If a 5 per cent decrease in Qantas airfares causes a 15 per cent increase in the number of people flying with Qantas. the elasticity of demand for Qantas's service is 0.33 2.00 3.00 7.50 The production function of a firm (business) refers to the maximum quantity of output that it can produce in a given period the maximum revenue it can earn from various levels of output the maximum output that can be produced from various quantities of inputs the minimum cost of producing various levels of output The average variable cost curve will shift upwards if there is an increase in fixed costs the pnce of the variable input increases the price of output increases there is a technological advance If a firm (business) faces a perfectly elastic demand curve for its product it is not a price taker it has to lower its price to increase sales its total revenue curve is a horizontal line at the current market price its marginal revenue is equal to the price of the product MoExplanation / Answer
vi) =%QD/%P So =+15%/-5%=-3% Answer is (c), but technically it's -3, not +3. vii) By definition, the production function equates quantity ofoutput with inputs. (c) viii) AVC=VC/Q. The only option that affects this is (b) achange in variable input prices ix) This is a little tricky because (b) and (d) are also true, butthere not true exclusively for a firm with a perfectly elasticproduct. But (c) is the one that's true that depends on theunusual feature of perfect elasticity. x) It's (d). Monopolistic competition features many sellers,low barriers to entry, and differentiated-but-similar products, buta monopoly has none of those.