Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right.
Suppose Candidate X is running against Candidate Y. If Candidate Z enters the race:
A. most of the voters who were going to vote for Y will now vote for Z.
B. approximately half of the voters who were going to vote for X will now vote for Z.
C. X will win because Y and Z will be competing for the same voters.
D. all of the voters who were going to vote for Y will now vote for Z.
Answer: A
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A) P > AVC. B) P = MC. C) P > ATC. D) P = ATC.
A regressive tax
a. taxes individuals with higher incomes at a higher rate than individuals with lower incomes. b. takes a similar percentage of income at all income levels. c. takes a higher percentage of the income of those with lower incomes than for those with higher incomes. d. taxes savings at a higher rate than consumption.
If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:
A. negative. B. inelastic. C. unit elastic. D. elastic.
With graph on interest rate and planned investment (downward sloping): Planned investment could decrease from $16 million to $12 million if
A) the government reduces government purchases. B) the Fed buys bonds in the open market. C) the government reduces net taxes. D) firms expect their sales to decrease in the future.