2 If the demand curve is elastic, increase in the price leads to the increase in Total Revenue

2-1. If the demand curve is elastic, increase in the price leads to the increase in Total
Revenue.



FALSE.
Reasons:
When demand curve is elastic (the price elasticity of demand is greater than one), increase in price reduces total revenue. The main reason are that price elasticity is greater than 1, and the rule of thumb works here.
Otherwise, when demand is less than 1 and quantity effect is stronger than the price effect, a higher price increases total revenue.
2-2. If the equilibrium price is $10 and government sets price floor at $8, this policy will
cause the shortage in the market.
TRUE

Reasons: when the government sets the price below the equilibrium price, there will be outnumbering demand than supply and as a result, shortages will happen.

2-3. If a consumer’s income is $100, Coke price is $2.00/can, and pizza price is $5.00/unit,
marginal rate of substitution at his optimum point is 3.

2-4. Monopoly is not desirable to the economy because it hurts consumers and benefits
producers.
TRUE
When there is monopoly, there will not be any competitors. And a monopoly’s price is market price and its demand is market demand. Even at high prices, consumers have to buy products because of no any alternative suppliers. Additionally, a monopoly can also refuse to serve for consumers. These all works for the disadvantage of consumers.

2-5. Under a perfectly competitive market, Economic Profit is zero in the Long-run while it is
above zero under a Monopoly market.