9

Figure 3 shows two demand curves at price = P*. Which of the following is most likely to explain the shapes of demand curve correctly?

Demand on A is more elastic.

If both A and B represent the same product, then A is for short-run demand and B is for long-run demand.

A has more substitutes.

B has a smaller share in consumers' expenditure (budget).

Question 11

Demand on your Economics textbook is quite price-inelastic because

it has no close substitute.

it is expensive.

it costs a huge share in students' budget.

it takes a whole semester to consume.

Question 12

In the long-run equilibrium, the existing perfectly competitive firms

always earn a positive economic profit.

never earn a normal profit.

sell products at the market price which equals their minimum average total cost .

still operate with negative economic profits.