Suppose There Are Only Two Goods, Apples and Oranges

question 164

Multiple Choice

Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?

• A) The consumer will substitute apples for oranges.
• B) The consumer will substitute oranges for apples.
• C) There is no substitution effect because relative prices have remained constant.
• D) Demand for both goods increases.
• E) Demand for both goods decreases.

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Definitions:

Clayton Act

A United States antitrust law passed in 1914, aimed at promoting fair competition for the benefit of consumers by preventing unethical business practices.

Mergers

The combination of two or more companies into a single entity, typically with the aim of achieving business growth or improving competitive advantage.

Anticompetitive Behavior

Practices that unfairly restrict competition and harm consumers or other businesses.

Rule-Of-Reason Analysis

An inquiry into the competitive effects of a company’s anticompetitive behavior to determine whether the benefits of the behavior outweigh the harm.