If the Price Elasticity of Demand for a Good Is

question 64

Multiple Choice

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

• A)0.6 percent increase in the quantity demanded.
• B)1.5 percent increase in the quantity demanded.
• C)2 percent increase in the quantity demanded.
• D)6 percent increase in the quantity demanded.

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Definitions:

Average Total Cost

The total cost divided by the quantity produced, denoting the cost per unit of production.

Natural Monopoly

A market structure where a single supplier is most efficient in producing the goods due to high fixed or startup costs, making it unfeasible for new entrants to compete.

Producer Surplus

The variance between the intended selling price by producers and the real price they end up receiving.

Consumers

Individuals or entities that purchase goods and services for personal use.