Figure 5-8

question 167

Multiple Choice

Figure 5-8. A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price.

-Refer to Figure 5-8.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

• A)0.92.
• B)3.89.
• C)4.33.
• D)5.67.

---

Definitions:

Profit Functions

Mathematical functions that represent a firm’s profits, typically as a function of price and quantity.

Pigouvian Tax

A tax imposed on any market activity that generates negative externalities (costs not reflected in the market price) with the aim of correcting the market outcome.

Cost Function

A mathematical relation that describes how production costs change with variations in the level of output.

Competitive Price

A pricing strategy that aims to attract customers by setting product prices similar or lower than rivals in the market.