The kinked-demand curve is based upon the assumption that an oligopolist's rivals will:
A. follow both a price cut and a price increase.
B. follow a price cut, but ignore a price increase.
C. ignore a price cut but follow a price increase.
D. ignore both a price cut and a price increase.
Answer: B
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If the price of a good falls and expenditure on the good rises, the demand for the good is _______
A. elastic B. perfectly elastic C. inelastic D. unit elastic
Suppose the economy is producing at the natural rate of output. An open market purchase of bonds by the Fed will cause ________ in real GDP in the long run and ________ in inflation in the long run, everything else held constant
A) an increase; an increase B) a decrease; a decrease C) no change; an increase D) no change; a decrease
A permanent decrease in taxes leads to
A) a small increase in current consumption. B) a large increase in current consumption. C) a small decrease in future consumption. D) a large decrease in future consumption.
A monopolist hires fewer workers than a perfectly competitive industry, other things being equal, because
A) a monopolist has to pay higher wages in order to attract additional workers. B) the monopolist substitutes more capital for labor when compared to a competitive industry. C) the monopolist producer has to deal with unions and face higher wages than do competitive industries. D) the monopolist produces less output than a competitive industry.