The Demand for a Good Is Price Elastic If

question 152

Multiple Choice

The demand for a good is price elastic if

• A)a rise in price increases total revenue.
• B)a fall in price decreases total revenue.
• C)a rise in price decreases total revenue.
• D)the good is a necessity.
• E)the demand for the good is very insensitive to changes in price.

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Definitions:

Long-Run Equilibrium

A situation where all factors of production and costs are variable, and all firms in a market are earning zero economic profit, indicating no incentive for market entry or exit.

Competitive Firm

A company operating in a market where there are many buyers and sellers, none of which can influence the market price.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.

Minimum AVC Point

The level of output at which a firm's average variable cost (AVC) is minimized.