Why is it difficult for an oligopolist to determine its profit-maximizing price and output?
It is difficult to predict how firms will react in situations of mutual interdependence. No firm knows what its demand curve looks like with any degree of certainty, and therefore it has a limited knowledge of its marginal revenue curve. To know anything about its demand curve, the firm must know how other firms will react to its prices and other policies. In the absence of additional assumptions, then, equating marginal revenue and expected marginal cost is relegated to guesswork. Thus, it is difficult for an oligopolist to determine its profit-maximizing price and output.
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
We can expect very small deviations from interest rate parity in
A) the domestic markets. B) the Eurocurrency market. C) the goods market. D) All of the above.
A consumer's budget line will shift to the right in a parallel manner if:
a. the price of the good on the X-axis decreases. b. the price of the good on the Y-axis increases. c. the consumer's income increases d. the consumer's income decreases.
Suppose a decrease in the supply of paper results in an increase in revenue. This indicates that
A) the demand for paper is inelastic. B) the demand for paper is elastic. C) the supply of paper is inelastic. D) the supply of paper is elastic.