A Firm Derives Revenue from Two Sources: Goods X and Y.Annual

question 114

Multiple Choice

A firm derives revenue from two sources: goods X and Y.Annual revenues from good X and Y are $10,000 and $20,000, respectively.If the price elasticity of demand for good X is -4.0 and the cross-price elasticity of demand between Y and X is 2.0 then a 2 percent price decrease will

• A)increase total revenues from X and Y by $520.
• B)decrease total revenues from X and Y by $520.
• C)leave total revenues from X and Y unchanged.
• D)decrease total revenues for X and Y by $600.

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Definitions:

Marginal Cost

The cost added by producing one more unit of a product or service, a key concept in economics determining optimal production levels.

Concentration Ratio

A measurement of the market share held by the largest firms within an industry, indicating the degree of market control.

Monopolistic Competitor

A business operating in a market structure characterized by many firms selling products that are similar but not identical, allowing for significant differentiation and competition.

ATC Curve

The Average Total Cost curve in economics represents how a firm's total cost per unit of output changes with the quantity produced.