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

Question

Quizplus · Accepted Answer

The high cross-price elasticity of 15.2 indicates that the demand for one good is highly sensitive to the price change of the other, suggesting that Goods X and Y are close substitutes. Therefore, the antitrust agency is likely to include Good Y in Good X's product market because the products do compete as close substitutes.

An Antitrust Agency Is Identifying the Product Market for Good