The Production of Toilet Paper in a Perfectly Competitive Market

question 19

Multiple Choice

The production of toilet paper in a perfectly competitive market is characterized by the inverse supply curve (marginal cost curve) P = 4Q, where Q is measured in millions of 4-roll packs per month. The inverse demand for toilet paper is P = 10 - 6Q. If the production of toilet paper causes an external marginal cost of 50 cents per 4-pack, the socially optimal price of toilet paper is $____ and the socially optimal quantity of toilet paper is ____ million.

• A) 4; 1
• B) 4.30; 0.95
• C) 4.20; 1.05
• D) 3; 2

Understand the effect of income changes on the demand for goods and services.

Distinguish between the concepts of price elasticity, income elasticity, and cross elasticity of demand.

Recognize how the proportion of a budget devoted to a product affects its price elasticity of demand.

Identify the relationship between the elasticity of demand and the nature of goods (necessities vs. luxury goods).

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Definitions:

Narcolepsy

A persistent condition marked by excessive sleepiness during the day and abrupt sleep episodes.

Daily Activities

Routine tasks or behaviors that individuals engage in on a regular basis, typically including work, leisure, and self-care practices.

Non-REM Sleep

A category of sleep characterized by slower brain waves and lacking the rapid eye movement (REM) phase, associated with deep physical rest and recovery.

Night Terrors

A sleep disorder causing feelings of panic or dread, typically occurring during non-REM sleep and resulting in partial or no memory of the episode upon waking.