If the Price of IPods Rises 10 Percent During a Year

question 26

Multiple Choice

If the price of iPods rises 10 percent during a year when the level of average prices rises 3 percent,the relative price of iPods compared with other goods

• A)Remains constant.
• B)Increases.
• C)Decreases.
• D)More information is required to answer this question.

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Definitions:

Price-Taker Firm

A price-taker firm is a business that accepts the market price set by the forces of supply and demand, lacking sufficient power to influence the price on its own.

Maximize Profit

The process of increasing the difference between the cost of production and the revenue generated from sales to the highest possible level.

Short Run

A period during which at least one factor of production is fixed, limiting the ability to adjust to changing market conditions.

Production

The process of creating goods or services using labor, machinery, and raw materials.