An Increase in the Price of Computer Chips Causes a Decrease

question 64

Multiple Choice

An increase in the price of computer chips causes a decrease in the total revenue of computer chip manufacturers. The price elasticity of demand for computer chips is:

• A) positive and elastic.
• B) inelastic.
• C) elastic.
• D) positive and inelastic.

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Definitions:

Average Cost Curve

A graphical representation that shows how the cost per unit of producing a good changes with changes in the volume of output.

Cost-output Elasticity

Cost-output elasticity measures the responsiveness of production costs to changes in the quantity of output produced, indicating how cost-efficiently a firm can adapt to changes in production volume.

Long-run Cost Function

Refers to a firm's costs of production when all inputs, including capital, are variable and can be adjusted.

Cost-output Elasticity

A measure of how responsive the total cost of production is to a change in the quantity produced.