Question 17 A catalyst is required for the production oth in

Question 17: A catalyst is required for the production oth increasing amounts of money to purchase one unit of catalyst. Then: A. Both the market price and market quantity of kerosene will increase Consider an oil company having to pay Both the market price and market quantity of kerosene will decrease The market price of kerosene will increase, while the market quantity will decrease D. The market price of kerosene will decrease, while the market quantity will increase Question 18: Rent ceiling\" is an example of a government policy in which the authorities set: B. The quantity C. Both the price and the quantity D. The production quota Question 19: Assume that the demand for good X is perfectlyinelastic, if the price increases by 10 %, the quantity demanded will: A. Decrease by 10% B, Decrease by less than 10% Decrease by 0% D. Decrease by an infinitely large amount Question 20: I thecross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the in the quantity of chicken demanded. price of fish will result in a A. 1% increase C. 10% increase % increase D. 20% decrease Question 21: If the government sets a price ceiling policy above the equilibrium price, then: A. Quantity demanded will equal quantity supplied X pm ere will be a surplus C. It will lead to a black market D. The price ceiling will not be effective

Solution

Answer 17 - market price of kerosene will increase while the market quantity will decrease.

Reason - as a result increased cost of production the market price will increase and as the cost increased the total demand will decrease thus the quantity will decrease as well.

Answer 18 - the price

Reason - ceiling rent is the maximum amount of rent which can be charged to rent a property. This maximim amount is set by the government and no landlord can charge rent over and above such ceiling limit.

Answer 19 - decrease by 0%

Reason - as the demand is perfectly inelastic, any change in price will not change the demand at all. It happens usually in case where the goods are necessity to live life or basic necessities.

Answer 20- 4% increase

Reason - cross elasticity measures the responsiveness in demand of one good with change in price of another good. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products. As there is a positive cross elasticity present here, fish is a substitute of chicken. So with increasing price of fish the demand for fish will fall and people will start shifting to chicken. And as the elasticity is twice the shifting will increase the demand of chicken by 4%.