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Author Question: What does the sign (positive/negative) of the cross elasticity of demand tell us about the ... (Read 125 times)

melly21297

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on: Jun 29, 2018
What does the sign (positive/negative) of the cross elasticity of demand tell us about the relationship between two goods?
 
  What will be an ideal response?

Question 2

Comment on the following statement: If a firm shuts down in the short run, it will earn zero economic profit.
 
  What will be an ideal response?


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maya.nigrin17@yahoo.com

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The sign of the cross elasticity of demand reveals whether two goods are substitutes or compliments: The cross elasticity of demand is positive for substitutes and negative for complements.

Answer to Question 2

The statement is false. In the short run, the firm has fixed costs to pay. If it shuts down, its total revenue will be equal to 0 . Therefore, the firm will suffer a loss equal to its fixed costs.


melly21297

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Reply 2 on: Jun 29, 2018
Gracias!

miss_1456@hotmail.com

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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