Oligopolists that follow the price leadership model:
A. are engaging in implicit, but not explicit, price fixing.
B. are violating antitrust laws.
C. have chosen to follow the grim-trigger strategy.
D. will be unable to overcome the duopolists' dilemma because firms will have an incentive to underprice the firm that is the price leader.
Answer: A
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The use of abstraction in economic analysis is one of its primary weaknesses.
Answer the following statement true (T) or false (F)
Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000 . Chelsea currently has $150,000 in the bank earning 3 percent interest per year. Suppose Chelsea purchases the factory using her own money. What is Chelsea's annual implicit opportunity cost of purchasing the factory?
a. $2,000 b. $3,000 c. $4,500 d. $5,000
Which of the following best characterizes the tradeoff faced by a monopolist when deciding what quantity to produce?
A. The firm can increase its output, but needs to lower its price for only the marginal unit of output. B. The firm can increase its output, but to do so it must charge a higher price to all customers. C. The firm gets more revenue from new customers by increasing output, but gets less revenue from existing customers given that it lowered its price. D. The firm gets less revenue from new customers by increasing output, but gets more revenue from existing customers given that it lowered its price.
Refer to the given data. Suppose that before specialization and trade Alpha chose production alternative C and Beta chose production alternative B. After specialization and trade, the gains will be:
A. 20 tons of fish.
B. 20 tons of chips.
C. 20 tons of fish and 20 tons of chips.
D. 240 tons of fish and 20 tons of chips.