The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:
A. increase their output whenever it increases its output.
B. keep their output constant if it changes its output.
C. decrease their output whenever it increases its output.
D. randomly change output whenever it changes its output.
Answer: B
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The repurchase agreement market dried up during the Great Recession because:
a. Counterparty risk increased, which caused normal lending channels to fail and lines of business to shrink. b.The collateral backing these agreements fell in value, causing large massive calls for additional collateral. c. Many participants were uncertain about the value of the securities backing these agreements. d. All of the above.
Figure 17-2
Given the situation in graph (1) in Figure 17-2, what movement would be expected in graph (2) from the economy's self-correcting mechanism?
a.
A to B
b.
A to D
c.
C to E
d.
D to C
The profit-maximization assumption of economic theory does not fit reality because:
A. all real firms want to maximize long-term profits rather than short-run profits. B. all real firms want to maximize their share of the market. C. real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization. D. real-world firms have a single goal, but this goal has nothing to do with profits.
What happens if the price of a product is below the equilibrium price?
A. The buyers will stop purchasing a "cheap" product. B. The producer will lower the price to sell more product. C. There will be an excess demand for the product. D. There will be a surplus of the product.