Suppose the Equilibrium Price in the Market Is $200 and the Marginal

question 150

Multiple Choice

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is −$200.Then we know that the own price elasticity of demand is:

• A) −0.5.
• B) −1.
• C) 2.
• D) It cannot be determined from the information contained in the question.

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Definitions:

Elastic

A characteristic of a product or service demand that indicates a sensitivity to price changes, where a small change in price leads to a significant change in quantity demanded or supplied.

Immediate Market Period

A very short time frame in which the supply of goods is fixed, meaning that the quantity available for sale cannot be changed regardless of price.

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied, leading to market stability.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price.