Given the Demand Function Q_X = 5,000 - 250P_X +120P_Y

question 122

Multiple Choice

Given the demand function Q_X = 5,000 - 250P_X +120P_Y +.04I where
P_Y = $50.00 and I = $60,000. When the price of good X is increased from $30.00 to $40.00, we know that demand for good X over this range is:

• A) elastic
• B) inelastic
• C) unitary elastic
• D) responsive to price changes
• E) a and d

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Definitions:

Average Variable Cost

The total variable cost divided by the quantity of output produced; it shows the cost of producing one more unit of output.

Short Run

A period in which at least one input in the production process is fixed, limiting the ability of the firm to adjust production.

Competitive Firm

A business operating in a market where it has little to no influence over the price of its product or service due to competition.

Break-even Price

The price at which the total revenues of a business exactly cover its total costs, thus resulting in neither profit nor loss.