Suppose that T-Mobile's cross price elasticity for international calls is 7.5. If Verizon (=T-Mobile'scompetitor) reduced its international charges by 3%, how would this affect the demand for T-Mobile's demand?Demand would rise by 2.5%Demand would rise by 22.5%.Demand would drop by 2.5%.Demand would drop by 22.5%. A monopolistic firm faces a demand curve thatOthe same as the marginal cost curve.is the same as the marginal revenue curve.is below the marginal revenue curve.is above the marginal revenue curve.

1. Cross price elasticity of demand = %age change in demand of good A / %age change in price of good B 7.5 = %age change in demand of good A / 3 % %age change in demand of good A = 22.5 % Therefore demand would increase by 22.5 % 2. A monopoly is a market structure where there is only one firm in the market for a good or service. It is the only supplier of the good/service with no substitutes available in the market. The monopoly has complete pricing power in the market. In this market structure, there is high barriers of entry due to regulation or economies of scale or due to dominant position The monopoly produced at point where MR = MC and charges price at demand curve that is always above the MR curve. Here answer is “is above the marginal revenue curve”

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Suppose that T-Mobile's cross price elasticity for international calls is 7.5. If Verizon (=T-Mobile's competitor) reduced its international charges by 3%, how would this affect the demand for T- Mobile's demand? |0|0|0|0 O Demand would rise by 2.5% Demand would rise by 22.5%. O Demand would drop by 2.5%. O Demand would drop by 22.5%.

Suppose that T-Mobile's cross price elasticity for international calls is 7.5. If Verizon (=T-Mobile's competitor) reduced its international charges by 3%, how would this affect the demand for T- Mobile's demand? |0|0|0|0 O Demand would rise by 2.5% Demand would rise by 22.5%. O Demand would drop by 2.5%. O Demand would drop by 22.5%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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