In Year 1 the Average Price of X Is $10,and

question 141

Multiple Choice

In year 1 the average price of X is $10,and in year 2 the average price of X is $23.If consumers buy more units of X in year 2 than in year 1,it follows that

• A) the law of supply does not hold for good X.
• B) demand for good X could be higher in year 2 than in year 1.
• C) supply of good X could be less in year 2 than in year 1.
• D) good X buyers have received an increase in income between year 1 and year 2,and good X is a normal good.
• E) b and d

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Definitions:

Economies of Scale

Refers to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Profit-Maximizing

A strategy or process where a firm determines the price, output level, or operational efficiency that will yield the highest possible profit.

Nondiscriminating Monopolist

A monopolist who charges the same price to all consumers for its products, regardless of differences in demand or willingness to pay.

Allocative Efficiency

Achieved when resources are distributed in a way that maximizes the net benefit to society, ensuring that each good is produced up to the point where the last unit provides a marginal benefit equal to the marginal cost of producing it.