Assume a Price Elasticity of Demand of 0

question 21

Multiple Choice

Assume a price elasticity of demand of 0.50.If the tobacco lobby is successful in reducing a tax on the price of cigarettes by 10 percent,the quantity demanded will:

• A) Decrease by 5 percent.
• B) Decrease by 2 percent.
• C) Increase by 5 percent.
• D) Increase by 2 percent.

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Definitions:

Long-Run Equilibrium

A state in economic analysis where all factors of production are variable, leading to companies operating at their most efficient level and no further economic profits in a perfectly competitive market.

Club Meeting

A scheduled gathering of members of a particular group or organization to discuss issues, plans, or activities related to the group's interests.

Attendance

The act of being present at a particular place or event.

Persons

Refers to individuals or entities that are capable of possessing rights and duties.