If the Price of Ice Cream Increases Substantially (Ceteris Paribus)

question 81

Multiple Choice

If the price of ice cream increases substantially (ceteris paribus) , the equilibrium quantity of hot fudge sauce, a complement, is likely to:

• A)increase, and the equilibrium price is likely to decrease.
• B)increase, and the equilibrium price is likely to increase.
• C)decrease, and the equilibrium price is likely to decrease.
• D)decrease, and the equilibrium price is likely to increase.
• E)decrease, while the impact on equilibrium price is uncertain.

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Definitions:

Total Product

The total quantity of output produced by a firm or economy with a given amount of inputs.

Diminishing Returns

An economic principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Average Product

The output per unit of a specific factor of production, calculated by dividing total production by the quantity of the employed factor.

Law of Diminishing Returns

An economic principle stating that if one factor of production is increased while other factors are held constant, the resulting increase in output will eventually decrease.