Suppose You Are Advising the Government on Changes in the Gasoline

question 37

Multiple Choice

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Long-run price elasticity of demand is constant at 0.8.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

• A)12%,and total expenditure will fall.
• B)32%,and total expenditure will rise.
• C)15%,and total expenditure will rise.
• D)15%,and total expenditure will fall.
• E)50%,and total expenditure will rise.

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Definitions:

Tactical Decision

Short-term decisions that are more specific and detailed than strategic decisions, focusing on the management of daily operations rather than long-term goals.

Costing System

A method for assigning costs to products or services, which can be based on activities, processes, or direct allocation.

Encourage Efficiency

Motivate actions or processes to achieve maximum productivity with minimum wasted effort or expense.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not influence future business decisions.