In the model of an oligopoly with identical (homogeneous) products, what is the price likely to be?
What will be an ideal response?
In an oligopoly with identical products, firms engage in tough competition in trying to gain market share. As a result, the market outcome is the same as it would be in a perfectly competitive industry: price equals marginal cost. This competitiveness comes from the fact that any one firm can steal all of the market from the other by dropping price only slightly. This incentive to undercut other firms' prices leads all firms to drop their prices to marginal cost.
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U.S. exports create a ________.
A. supply of foreign currencies and a demand for dollars in the foreign exchange markets B. supply of foreign currencies and a supply of dollars in the foreign exchange markets C. demand for foreign currencies and a demand for dollars in the foreign exchange markets D. demand for foreign currencies and a supply of dollars in the foreign exchange markets
The following diagram shows the market demand schedule for a good. When the price of the good is P, the shaded area represents:
a. ?consumer surplus. b. ?marginal utility of the good. c. ?shortage. d. ?marginal valuation of the good. e. ?price floor.
With a marginal propensity to save of .4, the marginal propensity to consume will be:
A. 1.0 minus .4. B. .4 minus 1.0. C. the reciprocal of the MPS. D. .4.
Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country
A) total employment is greater. B) total consumption of goods is greater. C) wages are higher. D) total welfare is greater.