The Hard Times Concrete Company is a monopolist in the concrete market.It uses two inputs, cement and gravel, which it buys in competitive markets.The company's production function is q = c^1/2g^1/2q, where q is its output, c is the amount of cement it uses, and g is the amount of gravel it uses.If the price of cement goes up, the firm's demand for cement A)goes down and its demand for gravel goes up. B)and its demand for gravel go down. C)goes down and its demand for gravel may go up, down, or remain the same, depending on the demand function for concrete. D)may go up, down, or not change, depending on whether the cement's elasticity of demand is less than, equal to, or greater than 21. E)could go up or down but must move in the opposite direction from its demand for gravel.

Question

Quizplus · Accepted Answer

The correct answer is C because the demand for cement and gravel are both inputs in the production of concrete. If the price of cement goes up, the firm may use less cement and more gravel, or vice versa, depending on the demand function for concrete.

The Hard Times Concrete Company Is a Monopolist in the Concrete