In the cigarette industry either R. J. Reynolds or Phillip Morris, for a time, raised prices twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Economists call this
A. predatory pricing.
B. a price war.
C. price leadership.
D. sales maximization.
Answer: C
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Resource use is allocatively efficient if the
A) total cost of what the resource produces is less than the total benefit of what is produced. B) total cost of what the resource produces is equal to the total benefit of what is produced. C) marginal benefit of what the resource produces has diminished to zero. D) marginal cost of what the resource produces is equal to the marginal benefit of what is produced.
When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect
A) normal; inferior B) substitution; income C) substitute; complement D) supply; demand
Policy that tries to influence target variables by changing the interest rate is called
A) fiscal policy. B) interest rate policy. C) recession policy. D) monetary policy.
Public schools, parks, libraries, and roads are paid for largely through tax revenue because
a. society finds them so valuable that citizens are happy to pay for their full cost. b. these goods create a free-rider problem. c. if they were funded privately, too many of these goods would be produced. d. All of the above are correct.