Figure 5-9 -Refer to Figure 5-9.Suppose This Demand Curve Is a Straight,downward-Sloping

question 502

Multiple Choice

Figure 5-9

-Refer to Figure 5-9.Suppose this demand curve is a straight,downward-sloping line all the way from the horizontal intercept to the vertical intercept.We choose two prices,P₁ and P₂,and the corresponding quantities demanded,Q₁ and Q₂,for the purpose of calculating the price elasticity of demand.Also suppose P₂ > P₁.In which of the following cases could we possibly find that (i) demand is elastic and (ii) an increase in price from P₁ to P₂ causes an increase in total revenue?

• A) 0 < P1 < P2 < $10.
• B) $10 < P1 < P2 < $15.
• C) P1 > $15.
• D) None of the above is correct.

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Definitions:

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A regional monopoly exists when a single firm dominates the market for a particular good or service in a geographic area.

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Game Theory

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Open Collusion

A situation where firms openly agree on prices, production levels, or market shares, violating competition laws.