Refer to Scenario 3

question 36

Multiple Choice

Refer to Scenario 3.1 below to answer the questions that follow.
SCENARIO 3.1: Rented DVDs and movies shown in theaters are substitutes. Rented DVDs and plasma TVs are complements. Plasma TVs and movies shown in theaters are normal goods. People watch rented DVDs more often in the winter than in the summer.
-Refer to Scenario 3.1. You observe that the rental price for DVDs is higher in the winter than in the summer. This would be explained by the fact that

• A) demand for rented DVDs is higher in the winter than in the summer.
• B) the quantity demanded of rented DVDs is higher in the winter than in the summer.
• C) there are more DVDs released into the rental market in the winter than in the summer.
• D) consumer income tends to fall in the winter and increase in the summer.

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Definitions:

Marginal Revenue

The additional income earned from selling one more unit of a good or service, an important concept in pricing and production decisions.

Total Revenue

The total amount of money generated by the sale of goods or services by a company before any costs are subtracted.

Barrier To Entry

Factors that prevent or inhibit new competitors from easily entering an industry or area of business, including high startup costs, strict regulations, and significant technological challenges.

Monopolistic Industry

An industry dominated by a single firm that has control over the market prices and supply of a product or service.