Use the Following to Answer Questions

question 347

Multiple Choice

Use the following to answer questions:
-(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 to spend on both goods. To maximize utility, you would consume _____ units of X and _____ units of Y.

• A) 3; 4
• B) 2; 3
• C) 2; 6
• D) 5; no

Understand the key characteristics and outcomes of monopolistic competition.

Determine the conditions for long-run equilibrium in monopolistic competition and how price equates to average total cost.

Analyze the impact of an increase in demand within monopolistically competitive markets and predict market dynamics.

Interpret graphical representations of firms and markets in monopolistic competition concerning prices, outputs, economic profits, and losses.

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Definitions:

Cross-Price Elasticity of Demand

A measurement of how the quantity demanded of one good changes in response to a change in the price of another good.

Midpoint Method

A technique used to calculate elasticity by taking the average of the starting and ending prices and quantities to determine percentage changes.

Income Elasticity of Demand

An indicator of the variability in a product's demand based on shifts in consumer income.

Price Elasticity of Supply

An indicator of the sensitivity of the amount of a product supplied to fluctuations in its price.