If the Price of a Cola Increased by 12% and Consumers

question 157

Multiple Choice

If the price of a cola increased by 12% and consumers responded by purchasing 24% less cola, the absolute value of price elasticity of demand for cola would be

• A) 0.20.
• B) 1.2.
• C) 2.
• D) 0.5.

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Definitions:

License Fee

A charge paid for permission to use intellectual property, enter a market, or perform certain activities within a regulatory framework.

Economic Profit

The surplus remaining after total costs are subtracted from total revenue, considering both explicit and implicit costs.

Marginal Revenue

The additional income earned by a firm from selling one more unit of a good or service.

Marginal Cost

The cost of producing one additional unit of a good or service, often used in decision-making to determine the optimal level of production.