Figure 4.3 illustrates the demand for tacos. Assume that tacos and burritos are substitutes. A decrease in the price of burritos would bring about a movement from:
A. point a to point c.
B. point c to point b.
C. D2 to D0.
D. D1 to D2.
Answer: C
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All of the following are ways by which existing firms can deter the entry of new firms into an industry except
A) continuously producing new and improved products. B) advertising products aggressively. C) threatening to raise prices. D) earning less than maximum profit.
An imperfectly competitive firm faces a demand curve that is:
A. downward-sloping. B. perfectly inelastic. C. more than perfectly elastic. D. perfectly elastic.
A natural monopoly
A) requires government licensing initially. B) is derived from deposits of natural resources. C) usually arises when there are large economies of scale. D) involves multiple firms selling differentiated products.
Why do firms engage in price discrimination?
A) to decrease cost B) to increase profits C) to increase consumer surplus D) to prohibit the resale of their products