Suppose That Firms in Each of the Two Markets Listed

question 84

Multiple Choice

Suppose that firms in each of the two markets listed below were to increase their prices by 20 percent.Which pair represents the example where customers would decrease their quantity purchased dramatically in one market and only slightly in the other market due to differences in market structure?

• A) corn and soybeans
• B) gasoline and restaurants
• C) water and cable television
• D) spiral notebooks and college textbooks

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Definitions:

Specialization

The process by which individuals, firms, or countries focus on producing a narrow range of products or services to gain greater efficiencies and yield higher quality or productivity.

Competitive Industry

An industry characterized by a large number of firms competing against each other, leading to innovation, lower prices, and improved products and services.

Economic Profit

The difference between a company's total revenue and its total costs, including both explicit and implicit costs, serving as a measure of the company's overall financial performance beyond just covering its opportunity costs.

Market Economy

An economic system in which supply and demand from consumers primarily determine what, how, and for whom goods and services are produced.