If Consumers Expected the Price of a Good to Increase

question 13

Multiple Choice

If consumers expected the price of a good to increase in the near future and the price of a complement good decreased at the same time, as a result:

• A)prices would rise.
• B)prices would fall.
• C)larger quantities to be exchanged.
• D)smaller quantities to be exchanged.
• E)both prices and quantities exchanged would increase.

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Definitions:

Cost Economies

Refers to economies of scale where the average cost per unit of production decreases as the volume of production increases.

Horizontal Differentiation

Products differ in ways that make them better for some people and worse for others.

Vertical Differentiation

A product difference that, from everyone’s perspective, makes a product better than rival products.

Vertical Differentiation

A market condition in which products are differentiated based on quality and features, where the products are ranked from best to worst by consumers.