Considering the Concept of Cross-Price Elasticity,if Two Goods Are Substitutes

question 74

Multiple Choice

Considering the concept of cross-price elasticity,if two goods are substitutes:

• A) an increase in the price of one causes a decrease in the demand for the other.
• B) a decrease in the price of one causes an increase in the demand of the other.
• C) an increase in the price of one causes an increase in the demand for the other.
• D) the cross-price elasticity is negative.

---

Definitions:

Average Fixed Costs

Costs that remain constant in total regardless of changes in the level of production or output.

Marginal Costs

The incremental cost associated with the production of one more unit of a service or product.

ATC

Average Total Cost, the sum of all production costs divided by the quantity of output produced, representing the per-unit cost of production.

AVC

Average Variable Cost, which is the total variable costs of production divided by the quantity of output produced.