Assume That When the Price of Rockmelons Is $2

question 104

Multiple Choice

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

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

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Definitions:

Operating Income

Operating income refers to an organization's earnings before interest and taxes (EBIT), derived from its primary business activities excluding any earnings from investments and other non-operational activities.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as the return divided by the cost of the investment.

Percentage

A ratio expressed as a fraction of 100.

Divisional Operating Income

Divisional operating income refers to the profit generated from the operations of a specific division within a company, excluding expenses and incomes that are not directly related to the division's operations.