If a 1 Per Cent Increase in the Price of X

question 89

Multiple Choice

If a 1 per cent increase in the price of X increases the quantity demanded of Y by 2 per cent, then X and Y are

• A) normal goods and the income elasticity of demand of each equals 2.
• B) substitutes and the cross elasticity of demand equals 2.
• C) substitutes and the cross elasticity of demand equals 1/2.
• D) complements and the cross elasticity of demand equals 2.
• E) complements and the income elasticity of demand equals 2.

Understand the inverted-U theory of R&D in terms of its relationship with industry concentration.

Identify the optimal amount of R&D spending for a firm based on economic considerations.

Comprehend the concept of creative destruction and its impact on competition and market structures.

Distinguish between different sources of financing for R&D (e.g., retained earnings, venture capital).

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Definitions:

Humus

Organic matter in various stages of decomposition in the soil; gives soil a dark brown or black color.

Prop Root

An adventitious root that arises from the stem and provides additional support for a plant such as corn.

Buttress Root

A bracelike root at the base of certain trees that provides upright support.

Pneumatophore

Roots that extend up out of the water in swampy areas and are thought to provide aeration between the atmosphere and submerged roots.