Cheating in a cartel is more likely to occur if the industry
A. has little ability to affect market prices.
B. has a large number of firms.
C. has easily observable prices.
D. has homogeneous products.
Answer: B
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The pollution charge
a. is the most commonly used market-based instrument internationally b. is sometimes implemented as an effluent charge to protect water resources c. can be used to control noise pollution d. all of the above e. none of the above
Refer to Figure 15.2. The economy is at full employment and the unemployment rate is at the natural rate at point
A) a. B) b. C) c D) d.
A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. B) incorrectly implies that the price of housing will rise when demand increases. C) incorrectly implies that more housing will be demanded at higher prices. D) correctly implies that an increase in demand will increase the market clearing price.
In deciding whether to invest in excess capacity in order to deter entry, incumbents should consider all of the following except
a. the order of play in pricing and capacity choice decisions b. the customer sorting pattern c. the sunk cost required to achieve excess capacity d. the joint-profit-maximizing cartel output e. the potential entrant's projected profitability