What conditions are necessary for a cartel to work? Diagram equilibrium price and output determination in a collusive oligopoly market. Explain how a decrease in demand accompanied by cheating by members can help break up a cartel
What will be an ideal response?
For a cartel to work, demand for their product must be inelastic (without substitutes) and there must be some means to monitor the firms to make sure they do not sell more than their quota, as prices are kept high by restricting output.
A decrease in demand puts downward pressure on price and, if firms try to maintain their levles of output by cheating, market output increases will continue to put downward pressure on price and cause cartel revenues to fall.
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The table below shows the data (in millions) for Wells Fargo Bank in September 2007 and September 2008. Suppose that the required reserve ratio is 3 percent
2007 2008 Loans 79 100 Reserves 11 11 Deposits 247 266 The data show that A) the currency drain ratio increased. B) the Federal Reserve must have increased the required reserve ratio. C) Wells Fargo had excess reserves and could create money in 2007. D) Wells Fargo was only able to make more loans in 2008 because it gained more deposits.
Output per person rises when
a. the population increases faster than real GDP b. real GDP rises faster than the number of employed workers c. real GDP increases at the same rate as the population d. real GDP rises slower than the population e. real GDP rises faster than the population
Centrally planned economies are not constrained by the problem of scarcity
a. True b. False Indicate whether the statement is true or false
The position of the long-run aggregate supply curve
a. is determined by resource usage and technology. b. is at the point where the unemployment rate is zero. c. shifts to the right when the money supply increases. d. is at the point where the economy would cease to grow.