An antitrust agency is identifying the product market for Good X and determines that Good X and Good Y have a cross- price elasticity of 0.01. As a result of the cross- price elasticity, the antitrust agency is likely to_____ Good Y from Good X's product market as the products ______ compete as close substitutes.
A)include; do not
B)exclude; do not
C)exclude; do
D)include; do

Question

Quizplus · Accepted Answer

A cross-price elasticity of 0.01 indicates that the goods are not close substitutes, as the value is close to 0, suggesting that a price change in one does not significantly affect the demand for the other. Therefore, the agency is likely to exclude Good Y from Good X's product market.

An Antitrust Agency Is Identifying the Product Market for Good