A Vertical Demand Curve Has a Price Elasticity of Demand

question 14

Multiple Choice

A vertical demand curve has a price elasticity of demand equal to

• A) 1.
• B) 0.
• C) infinity.
• D) 0 at low quantities and 1 at higher quantities.

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Definitions:

Zero Marginal Cost

Zero marginal cost describes a situation where producing one additional unit of a good or service does not increase the total cost of production.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, which are incurred regardless of the quantity produced.

Patent

A legal right granted by a government to an inventor, giving the holder exclusive rights to use, sell, and manufacture the invention for a certain period of time.

Zero Marginal Cost

A situation where producing one additional unit of a good or service does not increase the total cost of production.