How can increased competition lead to some form of imperfect competition, such as an oligopoly?
What will be an ideal response?
Competition can encourage firms to expand to take advantage of economies of scale and lower their average production costs. As their total output increases, market demand can now be satisfied with fewer firms. Smaller firms whose average production costs are higher will be unable to match the lower prices of firms with economies of scale. The smaller firms experience a reduction in AR, leading to losses and forcing them to leave the industry. If enough firms are squeezed out of business, the industry could end up as an oligopoly or even as a monopoly.
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When a nation begins to export a good,
a. the domestic price of that good falls b. less of that good is produced domestically c. the domestic producers are made better off d. the domestic consumers are made better off e. both domestic and foreign consumers will purchase more of it
In the classical model, beginning from an equilibrium in which the government is running a budget surplus,
a. this will lower the wage rate b. the demand for loanable funds will be horizontal c. an increase in government spending will crowd out more than an equal amount of private spending d. an increase in government spending will crowd out an equal amount of private spending e. an increase in government spending will crowd out less than an equal amount of private spending
If a firm is losing money, this implies that
a. consumers do not understand the value of the product. b. the value of the resources used to make the product is being reduced. c. the firm must go out of business immediately. d. this product cannot be produced profitably in the long run.
Capital gains are
A. The amount of corporate profit paid out for each share of stock. B. An increase in the market value of an asset. C. Profits used for investment in new plants and equipment. D. The only motive for purchasing stock.