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question 195

Multiple Choice

Assuming that U.S.and French wines are substitutes in consumption,if the U.S.government imposes a quota on the amount of French wine allowed into the United States and the quota is set at a quantity below equilibrium,the price of French wine in the United States will _____ while the price of the U.S.-produced wine will _____.


Definitions:

MC

Marginal Cost, the increase in total cost that arises from an extra unit of production.

MR

Marginal Revenue, the additional income generated from selling one more unit of a product or service.

Perfectly Elastic

Perfectly elastic refers to a situation where the quantity demanded or supplied responds infinitely to changes in price.

Perfectly Inelastic

A situation in which the quantity demanded or supplied of a good does not change in response to a change in price.

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