If Two Goods Are Substitutes, Their Cross-Price Elasticity of Demand

question 238

Multiple Choice

If two goods are substitutes, their cross-price elasticity of demand should be:

• A)less than 0.
• B)negative yet almost equal to 0.
• C)equal to 0.
• D)greater than 0.

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Definitions:

Short Run

A period in economic theory during which some factors of production are fixed, and only some variables, typically labor or raw materials, can be adjusted.

Average Total Cost

The total cost divided by the number of units produced, representing the cost per unit of output.

Fixed Costs

Costs that remain constant regardless of the level of production or business activity.

Monopolistically Competitive

A market structure characterized by many businesses selling products or services that are similar but not identical, allowing for competition based on product differentiation, prices, and quality.