If the Price Elasticity of Demand for Cigarettes Is 0

question 104

Multiple Choice

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

• A)0.55 percent.
• B)5.5 percent.
• C)55 percent.
• D)550 percent.

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Definitions:

Working Capital

The measure of a company's liquidity, efficiency, and its short-term financial health, calculated as current assets minus current liabilities.

Externalities

Costs or benefits that affect parties who did not choose to incur that cost or benefit, often related to environmental, public health, or economic activities.

Net Present Value (NPV)

A calculation used to assess the profitability of an investment, measuring the difference between the present value of its cash inflows and outflows.

Internal Rate of Return (IRR)

The rate of growth a project is expected to generate, calculated as the discount rate that makes the net present value (NPV) of all cash flows equal to zero.