Suppose There Is an Increase in the Cost of Resources

question 37

Multiple Choice

Suppose there is an increase in the cost of resources used in the production of good A. Then

• A)if the price of A rises, we know the demand for A is elastic.
• B)if the total revenue from sales of A rises, we know the demand for A is elastic.
• C)if the total revenue from sales of A falls, we know the demand for A is elastic.
• D)total revenue will increase because the price of A must rise.
• E)total revenue must fall because the quantity bought and sold of A must fall.

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Definitions:

Cars

Motor vehicles with four wheels, primarily used for transporting people rather than goods.

Lumber

Wood that has been processed into beams and planks, a stage in the process of wood production.

Heckscher-Ohlin Model

An economic theory that proposes countries will export products that utilize their abundant and cheap factors of production and import products that require factors of production that are scarce and expensive domestically.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.