Given a Downward Sloping Demand Curve and an Upward Sloping

question 190

Multiple Choice

Given a downward sloping demand curve and an upward sloping supply curve for product X, an increase in the price of a substitute good (in consumption) will:

• A)increase equilibrium price and quantity of X.
• B)decrease equilibrium price and quantity of X.
• C)increase equilibrium price and decrease equilibrium quantity of X.
• D)decrease equilibrium price and increase equilibrium quantity of X.

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Definitions:

Total Cost

The sum of fixed and variable costs incurred by a firm in producing and distributing a specified level of output.

Marginal Cost

The expenditure involved in fabricating one more unit of a product or service.

Average Total Cost

Average total cost is the total cost of production divided by the quantity of output produced, indicating the cost on a per-unit basis.

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