Suppose an Increase in Demand Causes the Price to Increase

question 152

Multiple Choice

Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to increase from 1,000 to 1,800.Using the midpoint method,the elasticity of supply equals

• A) 0.86.
• B) 1.17.
• C) 2.74.
• D) 0.68.
• E) None of the above answers is correct.

---

Definitions:

Barriers To Entry

Factors that make it difficult for new firms to enter a market, such as high startup costs, complex regulations, or entrenched competitors.

Monopolistic Competition

A market structure characterized by many firms selling differentiated products, allowing for some degree of market power.

Close Substitutes

Close substitutes are products or services that can serve as nearly identical alternatives for consumers, making them likely to switch if the price or quality of one changes.

MC = MR

A condition where marginal cost equals marginal revenue, often used to determine the profit-maximizing level of output in economic theory.