We Should Never Assume That an Inelastic Demand Curve Is

question 142

Multiple Choice

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

• A)there has never been evidence of a perfectly inelastic demand curve.
• B)an inelastic demand curve may be perfectly inelastic at some times but not others.
• C)perfectly inelastic demand curves are rare.
• D)an inelastic demand curve may be elastic at low prices.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of buyers and sellers, homogenous products, and easy entry and exit from the market.

Price Takers

Entities that have no power to influence the market price of the product they are selling or buying; they accept the prevailing market price.

Marginal Revenue

The extra revenue generated by the sale of an additional unit of a product or service.

Total Revenue

The total amount of money earned by a firm from selling its goods or services before any costs are subtracted.