Let Ed_t = -2

question 25

Multiple Choice

Let Ed_t = -2. This implies that the demand for movie tickets is

• A) Inelastic, because a 1% change in P_t changes Qd_t by 2 units
• B) Inelastic, because a 1% change in P_t changes Qd_t by 1%
• C) Elastic, because a 1% change in P_t changes Qd_t by 1%
• D) Elastic, because a 1% change in P_t changes Qd_t by 2%

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Definitions:

Opportunity Costs

The value of the best alternative forgone when a decision is made to pursue a certain action.

MR

Marginal Revenue, the increase in revenue that results from selling one additional unit of a product.

Average Total Costs

The total cost of production divided by the quantity produced, representing the per-unit cost of production.

Average Variable Costs

The sum of all variable production expenses divided by the amount of output generated.