Use the Following General Linear Demand Function Below $Q _ { d } = a + b P + c M + d P _ { R }$

question 31

Multiple Choice

Use the following general linear demand function below: $Q _ { d } = a + b P + c M + d P _ { R }$ where Q_d = quantity demanded,P = the price of the good,M = income, $P _ { R }$ = the price of a good related in consumption.The law of demand requires that

• A)a < 0.
• B)b < 0.
• C)P < 0.
• D)a < 0 and b < 0.
• E)b < 0 and P < 0.

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Definitions:

Long-Run Industry Supply

The relation between the price of a good and the total output produced by an industry once all adjustments have been made.

Economic Profit

The difference between total revenues and total costs, including both explicit and implicit costs.

Economic Profits

Profits that exceed the costs of all inputs, including both explicit costs (like wages and materials) and implicit costs (like the opportunity cost of capital).

Industry Equilibrium

A state where supply and demand in an industry are balanced, leading to stable prices and quantities.