Wobble's Weebles Is the Only Producer of Weebles

question 2

Multiple Choice

Wobble's Weebles is the only producer of weebles.It makes weebles at constant marginal cost c(where c > 0) and sells them at a price of p₁ per weeble in market 1 and at a price of p₂ per weeble in market 2.The demand curve for weebles in market 1 has a constant price elasticity of demand equal to -2.The demand curve for weebles in market 2 has a constant price elasticity equal to -3/2.The ratio of the profit-maximizing price in market 1 to the profit-maximizing price in market 2 is

• A)2/3.
• B)1/3.
• C)3/2.
• D)3.
• E)dependent on the value of c.

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Definitions:

Aggregate Demand

The total demand for all goods and services in an economy at various price levels, at a given point in time.

Aggregate Supply

The total amount of goods and services that producers are willing and able to supply at a given overall price level in an economy.

Market Risk

Market risk, also known as systematic risk, refers to the potential for investors to experience losses due to factors that affect the overall performance of the financial markets.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates that the stock's price is more volatile than the market.