Which of the following is true of an economic model?
a. It is a simplified representation of a situation that includes enough of the key features to be useful.
b. It is always based on a mathematical formula
c. It is a physical representation of a real world situation in a laboratory.
d. It is always named after the economist who devises it.
b
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Campbell Soup agrees to sell its brand to a grocery chain only if the chain also agrees to buy a minimum number of cases of its V-8 juice. This is an example of:
a. a resale price maintenance agreement. b. a tying agreement. c. exclusive dealing. d. price discrimination.
Many economists believe that savings accounts should be added to M1 because they
a. are larger in size than conventional checking accounts. b. pay larger interest than checking accounts. c. can be transferred quickly into checkable accounts. d. are also insured by the federal government.
A market is NOT contestable if:
A. existing firms cannot respond quickly to entry by lowering their price. B. there are sunk costs. C. consumers respond quickly to a price change. D. all producers have access to the same technology.
The existence of economies of scale is one reason oligopolies exist because
A) a firm is able to increase price leading to increased profits. B) the marginal cost decreases as output increases. C) of strategic dependence. D) as output increases average total cost decreases leading to large-scale firms.