According to the figure, if MiiTunes charges low prices, The Rock Shop should:
This figure displays the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to make a profit at such low prices. The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
A. enter the market and earn $4 million.
B. enter the market and lose $2 million.
C. not enter the market and earn $0.
D. It cannot be determined what The Rock Shop will do.
C. not enter the market and earn $0.
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Unlike minimum wage laws, wage subsidies
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A 2 percent increase in the price of shoes leads to a 5 percent decrease in the quantity demanded of shoes. The absolute price elasticity of demand is
A. 2.5. B. 0.2. C. 1. D. 0.4.