Someone who knows nothing about the relative quality of a $2 toothbrush and a $7 toothbrush, both available for sale, but chooses to buy the more expensive one, is probably
A) displaying an inelastic demand for toothbrushes.
B) judging quality by price.
C) violating the law of demand.
D) wealthy enough not to care about prices.
B
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Explain why a centrally-planned economy might not grow as rapidly as a market economy
What will be an ideal response?
When price is less than average variable cost at the profit-maximizing level of output, a firm should:
A) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the short run. B) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the long run. C) shutdown, because it will lose nothing in that case. D) shutdown, because it cannot even cover all of its variable costs let alone its fixed costs if it stays in business.