The kinked demand curve is an attempt to model strategic behavior
Indicate whether the statement is true or false
True
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In the case of perfectly elastic demand, the demand curve is:
A. upward sloping. B. downward sloping. C. vertical. D. horizontal.
For most goods and services, income elasticity of demand tends to be smaller in the short run than in the long run. However, a recent study shows that the demand for a durable good such as automobiles tends to be more income-elastic in the short run than in the long run. Explain why.
What will be an ideal response?
A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from good A to:
A. Increase and total revenues from good B to decrease B. Increase and total revenues from good B to increase C. Decrease and total revenues from good B to increase D. Decrease and total revenues from good B to decrease
Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the:
A. Supply of money curve is vertical B. Supply of money curve is horizontal C. Demand for money curve is directly related to the interest rate D. Supply of money curve is inversely related to the interest rate