To determine whether two goods are substitutes or complements, an economist would estimate the:
A. price elasticity of demand.
B. income elasticity of demand.
C. cross elasticity of demand.
D. price elasticity of supply.
Answer: C
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In order to practice third degree price discrimination all of the following conditions must hold except that the firm
a. has monopoly power. b. is able to exercise control over resales. c. is willing to sell more to each customer at lower prices. d. charges a lower price to groups with more elastic demand.
In the above figure, at a price of $4 per unit, a profit-maximizing perfectly competitive firm will
A) shut down because its total revenue is less than its variable costs. B) incur an economic loss. C) produce 5 units. D) Both answers A and B are correct.
Consider the market for wheat which is a perfectly competitive market. Is the market demand curve the same as the demand curve facing an individual producer? If not, explain how and why they are different? Illustrate your answer graphically
What will be an ideal response?
Considering the concept of cross-price elasticity, if two goods are substitutes:
A. an increase in the price of one causes a decrease in the demand for the other. B. a decrease in the price of one causes an increase in the demand of the other. C. an increase in the price of one causes an increase in the demand for the other. D. the cross-price elasticity is negative.