If the Price of a Product Increases, Then

question 180

Multiple Choice

If the price of a product increases, then

• A) the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, decreases.
• B) the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, increases.
• C) the budget line shifts outward and the optimal quantity demanded, which corresponds to the higher price, decreases.
• D) the budget line shifts inward and the optimal quantity demanded, which corresponds to the higher price, increases.

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Definitions:

Monopolistically Competitive

Refers to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, or insurance.

Short Run

A period in economics during which at least one input is fixed, limiting the ability of a firm to adjust its production levels.

Monopolistically Competitive

refers to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and promotional differentiation.