Which of the following would NOT affect a good's price elasticity of demand?
A) the ease of substitution between goods
B) the cost of producing the good
C) the number of substitute goods available
D) the proportion of one's budget spent on an item
Answer: B
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Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $1, what changes in the market would result in an economically efficient output?
A) The price would increase, the demand would increase, and the supply would decrease. B) The quantity supplied would increase, the quantity demanded would decrease, and the equilibrium price would increase. C) The price would increase, the quantity supplied would increase, and the quantity demanded would decrease. D) The price would increase, quantity demanded would increase, and quantity supplied would decrease.
The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, compared to a perfectly competitive market, the change in producer surplus is
A) B + C. B) D + E. C) A + B + C. D) A + B + C + D + E.