Refer to the fiGure

question 195

Multiple Choice

Refer to the figure. Assuming this market is representative of the economy as a whole, this economy

• A) is highly susceptible to inflation.
• B) faces fluctuating output levels whenever there is a demand shock.
• C) is capable of always producing at its optimal capacity.
• D) is largely immune to business cycles.

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Definitions:

Marginal Cost

The added cost of producing one additional unit of output.

Marginal Revenue

The incremental income achieved by dispensing one more unit of a good or service.

Full-Fare Customers

Passengers who pay the full, un-discounted price for their tickets, typically providing higher revenue per seat for service providers.

Peak-Load Pricing

A pricing strategy that sets higher prices during times of high demand and lower prices during times of low demand.