If the Price of Gasoline Rises Sharply and the Demand

question 226

Multiple Choice

If the price of gasoline rises sharply and the demand for sports utility vehicles falls, then the two goods are

• A)complements.
• B)normal goods.
• C)substitutes.
• D)inferior goods.

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Definitions:

MR = MC Rule

A principle in economics stating that profit maximization occurs when marginal revenue equals marginal cost.

Short Run

A period in economics where at least one input is fixed and cannot be changed.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.

Allocative Efficiency

A condition where resources are distributed according to consumer preferences, optimizing utility for both producers and consumers.