Assume There Is a Decrease in the Number of Substitutes

question 23

Multiple Choice

Assume there is a decrease in the number of substitutes for a good produced by a profit-maximizing price-setting firm.All else constant,this would cause the firm's ability to markup price above average cost to:

• A)decrease.
• B)stay the same.
• C)increase.
• D)cannot be determined with the information given.

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Definitions:

Default Free

An investment that is considered to have no risk of failure to pay back principal or interest.

CGB Futures

Futures contracts based on Canadian Government Bonds, which allow investors to speculate on or hedge against future changes in the value of these bonds.

Quoted Price

The current price at which an asset or service can be bought or sold, often provided in financial markets or by vendors.

Natural Hedge

A transaction between two counterparties where both parties’ risks are reduced.