Choose the correct answer and explain why is right

40 P AQ Ed = %4Q Ed = Q average MU1 MU2 AP Ed = AQ ATC Q AP P1 MPP = P 2 AL MC = Paverage AQ Section 1: True-False Questions (15 points) 1. Marginal utility is computed by dividing total utility by the quantity consumed of a good. a) True by False 2. Cross-price elasticity of demand is negative if the goods are substitutes. a) True (b) False 3. As the price of a product falls the product will become more inelastic in demand, assuming that the demand curve for the product is a downward-sloping straight line. a ) True 6 False 4. If the price of a good goes up by 5 percent and the quantity demanded falls by 15 percent, the price elasticity of demand is 1/3. a) True (b) False 5. When a good is perfectly elastic in demand, the sellers will pay the full tax that is placed on the sellers. a True b) False 6. When the price of a good rises, total revenue will increase if the good is elastic in demand. a) True By False 7. It is not possible for total utility to rise as marginal utility falls. (a) True (6) False 8. Given that fixed costs are constant as output increases, average fixed costs are also constant. a) True (b) False 9. When the marginal cost is greater than the average cost, then the average cost is decreasing. a True by False 10. Marginal utility is always a positive number. a) True (b) False