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 18.6. As a result of the cross- price elasticity, the antitrust agency is likely tov Good Y from Good X's product market as the products ______ compete as close substitutes.
A)exclude; do
B)include; do not
C)exclude; do not
D)include; do

Question

Quizplus · Accepted Answer

A high cross-price elasticity of 18.6 indicates that Good X and Good Y are close substitutes, meaning that a price change in one will significantly affect the demand for the other. Therefore, the antitrust agency is likely to include Good Y in Good X's product market as they do compete as close substitutes.

An Antitrust Agency Is Identifying the Product Market for Good