When the price of the product falls
a. consumer's surplus remains the same.
b. producers' surplus increases.
c. consumer's surplus falls.
d. producer's surplus falls.
d
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Which of the following describes a barrier to entry?
A) something that establishes a barrier to expanding output B) anything that protects a firm from the arrival of new competitors C) a government regulation that bars a monopoly from earning an economic profit D) firms already in the market incurring economic losses so that no new firm wants to enter the market E) Firms are legally prohibited from exiting the market in order to enter another market.
Recall that the Cobb-Douglas Utility function U(X,Y) = XaY1-a has the unusual property that the demand for each good depends only on its own price
Therefore, a consumer will always allocate the same proportion of income to each good. Specifically, the demand for X is X* = aI/px where I is income and px is the price of X. a. What is the price elasticity of demand for X? b. What is the direction of the income effect on X of an increase in px?