Suppose That Each Serving of Mac & Cheese Costs Exactly

question 118

Multiple Choice

Suppose that each serving of Mac & Cheese costs exactly $0.50 to make no matter how many servings are produced.This means that the price elasticity of supply for Mac & Cheese is ______ and the supply is _______.

• A)one;perfectly inelastic
• B)zero;perfectly elastic
• C)infinity;perfectly inelastic
• D)infinity;perfectly elastic

Clarify misconceptions regarding the relationship between price, marginal cost, and average total cost in different market structures.

Explain the role of product differentiation in creating market power for firms in monopolistically competitive markets.

Describe the dynamic adjustment process toward long-run equilibrium in monopolistically competitive markets.

Identify the conditions under which a monopolistically competitive firm can earn zero, positive, or negative profits.

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Definitions:

Prospect Theory

A behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.

Matching Contribution

A contribution to a retirement plan, for instance, where an employer matches the employee's contribution up to a certain percentage.

Financial Well-Being

A state of being wherein an individual or family has control over their finances, can absorb a financial shock, is on track to meet financial goals, and has financial freedom to make choices that allow them to enjoy life.

Prospect Theory

Prospect Theory is a behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are unknown.