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 0.04. 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
B)include; do not
C)exclude; do not
D)exclude; do

Question

Quizplus · Accepted Answer

exclude; do notA cross-price elasticity of 0.04 indicates that the demand for Good X is not very responsive to changes in the price of Good Y, suggesting that consumers do not see Good Y as a close substitute for Good X. Therefore, the antitrust agency is likely to exclude Good Y from Good X's product market because the products do not compete as close substitutes.

An Antitrust Agency Is Identifying the Product Market for Good