If the Cross-Price Elasticity of Demand Between Good a and Good

question 103

Multiple Choice

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?

• A) 3%
• B) 10%
• C) -1.25%
• D) 1.50%
• E) -3%

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent or salaries.

Profit-maximizing

The process of adjusting output and production levels to achieve the highest possible profits.

Output Units

A measure of production that represents the total quantity of goods and services produced over a specific period of time.

ATC

Average Total Cost, a firm's total cost divided by its total output.