The correct answer is: D. a-2, b-1, c-4, d-3
- a. Cross elasticity is zero
Cross elasticity of demand is a measure of how responsive the demand for one good is to a change in the price of another good. If the cross elasticity of demand is zero, it means that the two goods are independent, and a change in the price of one good will not have any effect on the demand for the other good.
- b. Shut down point
The shut down point is the point at which a firm is producing no output and is just breaking even. At this point, the firm’s revenue is equal to its variable costs, and its profits are zero.
- c. Slutskey theorem
The Slutskey theorem is a theorem in economics that states that the total effect of a change in price on demand can be decomposed into two effects: the substitution effect and the income effect. The substitution effect is the effect of a change in price on the relative prices of goods, and the income effect is the effect of a change in price on real income.
- d. Production possibility
The production possibility frontier is a curve that shows the maximum combination of goods that can be produced with a given amount of resources. It is a graphical representation of the law of diminishing returns.
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