Topic: Market Demand Diculty: 2% Correct Responses: 0 Discrimination Index: 015.1 Suppose that the.

Topic: Market Demand Diculty: 2% Correct Responses: 0 Discrimination Index: 015.1 Suppose that the inverse demand function for wool is p = A=q for some constant A. Supposethat 1=4 of the world’s wool is produced in Australia. a) If Australian wool production increases by1% and the rest of the world holds its output constant, what will be the eect on the world priceof wool? b) How is the marginal revenue to Australia from an extra unit of wool relate to the priceof wool?Answer: a) Price will fall by about one fourth of one percent. b) Marginal revenue is three fourthsof price.Topic