Assume That Apples and Oranges Are Substitute Goods

question 19

Multiple Choice

Assume that apples and oranges are substitute goods.Given the initial supply and demand curves for apples,a reduction in the price of oranges will tend to

• A)increase the price of apples.
• B)increase the demand for apples.
• C)increase the demand for oranges.
• D)decrease the demand for oranges.
• E)decrease the price of apples.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, and freedom of entry and exit, leading to price taking behavior by all firms.

Long-run Equilibrium

Describes a state in a market where supply equals demand, with sufficient time for all factors of production to adjust and no external pressures.

Demand

The measure of a commodity or service consumers intend and are able to acquire at multiple price levels during a set time span.

Economic Profits

Profits exceeding the opportunity costs of all resources employed, including both explicit and implicit costs, signifying above-normal returns.