Suppose the Price of a Cookie Is $2

question 46

Multiple Choice

Suppose the price of a cookie is $2.50 and the quantity demanded is 50. When the price drops to $1, the quantity demanded increases to 200. Using the midpoint method, what is the price elasticity of demand?

• A) −1.40
• B) −0.72
• C) −140
• D) −7.2

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Definitions:

GAAP

Generally Accepted Accounting Principles; a common set of accounting rules and standards used in the United States.

Par Value

The face value of a bond or stock as stated by the issuing company, which may differ from its market value.

Undervalued

A term used to describe assets or securities that are selling for a price presumed to be below their true intrinsic value.