Suppose That the Demand Curves for Goods A, B, and C

question 5

Multiple Choice

Suppose that the demand curves for goods A, B, and C have the following functional forms:, where Q denotes quantity demanded and P denotes price: Q_A = 120 - 3.5 P_A - 6P_B Q_B = 100 - 2P_B + 3P_C Q_C = 1500 - 0.5P_C.
Based on these demand curves, which of the following pairs of goods are known to be complements?

• A)A and C
• B)B and C
• C)A and B
• D)A and C, and B and C
• E)None of the pairs are complements.

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Definitions:

Margin

Margin refers to the difference between the selling price of a good or service and its cost of production, also used to describe profit margin or markup.

Total Revenue Product

The total revenue generated by a factor of production, calculated by multiplying the marginal product of the factor by the market price of the output.

Marginal Revenue Product

The additional revenue generated from utilizing one more unit of an input, like labor or capital.

Substitution Effect

The shift in consumer behavior toward different products as a result of changes in their relative costs, prompting the replacement of one item with another.