To Say That Two Goods Are Substitutes, Their Cross Price

question 109

Multiple Choice

To say that two goods are substitutes, their cross price elasticities of demand should be:

• A) less than zero.
• B) negative, yet almost equal to zero.
• C) equal to zero.
• D) greater than zero.

---

Definitions:

Cartels

An association of independent firms or countries that agree to coordinate their production and pricing decisions to monopolize a market and maximize collective profits.

Collusive Agreement

A secret or illegal cooperation or conspiracy, especially between competitors, aimed at deceiving or gaining an unfair advantage in the market.

Dominant Firm

A company that has a major share of the market for a particular product or service, often able to influence market conditions.

Competitive Fringe

Small, less dominant firms in a market that compete at the periphery with the larger dominant firms, often by focusing on niche segments.