If the Price of a Product Rises, Consumers Buy Less

question 142

Multiple Choice

If the price of a product rises, consumers buy less of the good because the:

• A) MU/P of the good falls below the MU/P of other goods.
• B) MU/P of the good rises above the MU/P of other goods.
• C) marginal utility of the good diminishes.
• D) total utility of the good diminishes.
• E) marginal utility of the good rises.

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Definitions:

Loss-Leader Pricing

Deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention to it in hopes that they will buy other products with large markups as well.

Dumping

The act of exporting a product at a price lower than its normal value, often with the intent of undermining local markets or competitors.

Second-Market Pricing

The practice of determining the price of goods and services based on their market value in secondary, often resale, markets.

Gray Market

A situation where products are sold through unauthorized channels, often legally, but without the consent of the original manufacturer.