If a Factor of Production Has Many Close Substitutes, We

question 67

Multiple Choice

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be

• A) unity.
• B) zero.
• C) greater than one.
• D) less than one, but greater than zero.

---

Definitions:

Herfindahl-Hirschman Index

A measure of market concentration used to determine the level of competition within an industry.

Market Share

The portion of a market controlled by a particular company or product.

Oligopolistic Models

Economic models that describe markets in which a few firms dominate, often leading to pricing and output decisions that consider the actions of competitors.

Cartel

An agreement among competing firms to control prices or exclude entry of a new competitor in a market, often in order to maximize the members' profits at the expense of consumers.