Ceteris paribus, as the number of substitutes for a good increases, the
A. Price elasticity of demand should become larger.
B. Cross-price elasticity of demand should become negative.
C. Income elasticity of demand should become negative.
D. Price elasticity of demand should become smaller.
Answer: A
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A movement along the consumption function shows the change in consumption expenditure as a result of a change in
A) disposable income. B) the interest rate. C) net taxes. D) the price level. E) saving.
An oligopolist charges a lower price than the short-run profit-maximizing price. How does this affect the firm’s allocative efficiency?
a. The firm achieves allocative efficiency because P 1 exceeds MC.
b. The firm fails at allocative efficiency because P 1 is less than the minimum ATC.
c. The firm fails at allocative efficiency because P 1 exceeds MC.
d. The firm achieves allocative efficiency because P 1 is less than MC.