Suppose two firms produce close substitutes such that reducing the price of one product reduces the quantity demanded of the other. If those two firms merge:
A. they can earn higher profits by continuing to sell both products if the profit gained from increased sales of one product are greater than the lost profits from reduced sales of the other product.
B. they will eliminate the less profitable product and sell only one.
C. they will raise prices on both products.
D. they will be unable to earn higher profits because the two products will compete against each other.
Answer: A
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"Inflation Targeting Rule" is a special case of a
A) Taylor Rule with zero weight on output. B) Taylor Rule with zero weight on inflation. C) Taylor Rule with an equal weight on output and inflation. D) Taylor Rule with different but positive weights on output and inflation.
To conduct open market operations, the FOMC issues a directive to
A) the trading desk at the Federal Reserve Bank of New York. B) the Board of Governors in Washington, D.C. C) the presidents of the district banks. D) the chairman of the New York Stock Exchange.
The Fed cannot predict the effects of open market operations with perfect accuracy because of
a. changes in people's desires for cash. b. foreigners desire to hold U.S. dollars. c. banks' desires to hold excess reserves. d. All of the above are correct.
A monopoly
a. can ignore the law of demand b. faces a demand curve for its output that is nowhere price inelastic c. establishes the market price when it decides how much to charge d. can sell additional units of output without lowering its price e. is also a perfect price discriminator