Assume That When the Price of Cantaloupes Is $2

question 2

Multiple Choice

Assume that when the price of cantaloupes is $2.50, the demand for cantaloupes is unit-elastic and the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00, which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

• A) The demand for cantaloupes at $2.00 must be inelastic.
• B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price.
• C) The demand for cantaloupes at $2.00 must be elastic.
• D) The demand for cantaloupes at $2.00 must be unit-elastic.

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Definitions:

Net Present Value

The disparity between the current value of incoming cash and the current value of outgoing cash over a certain timeframe.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered for depreciation calculations.

Cash Inflows

The total amount of money being transferred into an entity, coming from various sources like sales, financing, or investments.

Financially Attractive

A term used to describe investments or opportunities that are likely to provide a good financial return.