Short-run average cost is
A. less than short-run marginal cost when short-run marginal cost is decreasing.
B. always greater than long-run average cost.
C. always less than long-run average cost.
D. both a and c
E. none of the above
Answer: E
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If the elasticity of supply coefficient for a good is 6, we know:
a. that for every 1% increase in quantity, there will be a 6% increase in price. b. that for every 1% increase in quantity, there will be a 6% decrease in price. c. that for every 6% increase in quantity, there will be a 1% increase in price. d. that for every 6% increase in quantity, there will be a 1% decrease in price.
When the price of a good rises, the resulting change in quantity demanded due solely to the decline in your income's purchasing power is called the
a. Giffen-good phenomenon. b. law of demand. c. substitution effect. d. income effect.