If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
A) substitute goods.
B) inferior goods.
C) normal goods.
D) complementary goods.
E) The questions errs because it is the quantity of used cars, NOT the demand for used cars, that will change when the price of a new car falls.
A
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If a perfectly competitive firm's average total cost is less than the price, then the firm
A) incurs an economic loss. B) makes an economic profit. C) makes zero economic profit. D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.
Exhibit 7-4 Marginal cost and revenue for a firm UnitQuantity Marginal Cost Marginal Revenue 12 $ 5 $9 13 6 9 14 7 9 15 8 9 16 9 9 17 10 9 In Exhibit 7-4, what is this firm's profit-maximizing rate of output?
A. 13. B. 14. C. 15. D. 16.