How do economies of scale result in barriers to entry into oligopoly models?
Economies of scale act as barriers to entry because newer, smaller firms will have costs that are substantially higher than for larger established firms. This means that prices that can be profitable for existing firms can be unprofitable for potential new firms, deterring entry.
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When summer hurricanes pass through the Gulf of Mexico and force oil drillers to evacuate their rigs,
A) the supply of oil increases, which therefore increases price. B) the supply of oil increases, which therefore decreases price. C) the supply of oil decreases, which therefore increases price. D) the supply of oil decreases, which therefore decreases price.
Refer to Figure 10-6. The loanable funds market is in equilibrium, as shown in the figure above
As a result of an increase in the government budget deficit, the ________ for loanable funds will ________, thereby ________ the equilibrium real interest rate and ________ the equilibrium quantity of loanable funds. A) supply; rise; decreasing; increasing B) demand; fall; decreasing; decreasing C) demand; rise; increasing; decreasing D) supply; fall; increasing; decreasing
A value of the absolute price elasticity of demand equal to 0.25 indicates that
A) a 5% decrease in price leads to a 2% increase in quantity demanded. B) a 2% decrease in price leads to a 25% increase in quantity demanded. C) a 1% decrease in price leads to a 2.5% increase in quantity demanded. D) a 0.25% decrease in price leads to a 1% increase in quantity.
What important lesson did American economists learn in the 1980s and again in 2001-2003?
a. Large tax cuts can lead to a balance of trade surplus. b. Large government budget deficits can crowd out consumption. c. Large government budget deficits can bankrupt the nation. d. Large government budget deficits can crowd out net exports.