One shortcoming of the kinked-demand curve model of oligopoly is it does not explain:
A. why the firm is a least-cost producer.
B. why the marginal revenue curve is kinked.
C. how the going price gets determined in the first place.
D. what the equilibrium level of profits is for the firm.
Answer: C
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Claudia spends her income on two goods, Blu-ray rentals and chewing gum. She considers both goods to be normal goods. If Claudia's income increases and the prices of the two goods remain constant, she will:
A. rent more Blu-rays and purchase less chewing gum. B. rent more Blu-rays and purchase more chewing gum. C. rent fewer Blu-rays and purchase more chewing gum. D. rent fewer Blu-rays and purchase less chewing gum.
In order to maximize utility, a consumer should allocate money income so that
A) the marginal utility of the last unit of each product consumed is greater than the total utility of each product consumed. B) the total utility derived from each product consumed is the same. C) the marginal utility obtained from the last dollar spent on each product is the same. D) the elasticity of demand on all products purchased is the same.
The concept of "invisible hand" introduced by Adam Smith explains: a. why people act in their own best interests
b. why the government intervenes to overcome failures in private markets. c. how people, acting out of self-interest, unintentionally promote the general good. d. how comparative advantage and specialization promote international trade. e. how the creation of goods and services generates its own demand by creating employment and income.
GDP measured using current prices is called:
A. constant GDP. B. real GDP. C. deflated GDP. D. nominal GDP.