If the quantity of potatoes demanded rises 2 percent when the price of potatoes declines 10 percent, then the price elasticity of demand is:

Under a binding price ceiling, what does the change in producer surplus represent?

A) The gain in surplus for those sellers who are still willing to supply the product at the lower price. B) The loss in surplus associated with those units that used to be produced at the higher price but are no longer produced at the lower price. C) The gain in surplus associated with the excess demand created by the price ceiling policy. D) Both A and B are correct. E) Both A and C are correct.

Answer the following statement(s) true (T) or false (F)

1. The demand curve for a monopolistic firm is the same as the demand curve for its market. 2. A monopolist’s marginal revenue always less than the price. 3. A monopolist will intentionally operate on the inelastic portion of its demand curve. 4. If marginal costs exceed marginal revenues, profits drop. 5. Multiplying average total cost by the output level gives the total cost.