For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market. Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?
What will be an ideal response?
Pursuing market share is not the same thing as profit maximization. Pricing for maximum profit might have given GM less than a 40 percent share of the market. To increase sales, GM would have had to reduce price below the profit-maximizing price. However, GM might have thought that maintaining significant market share would help preserve their profitability in the face of foreign competition in the long run
You might also like to view...
In the 1970s we had _____ recessions and in the 1980s we had _____ recessions.
Fill in the blank(s) with the appropriate word(s).
The production function Y = AK?L1-? exhibits
a. constant returns to scale. b. diminishing marginal returns to scale. c. increasing returns to scale. d. decreasing returns to scale. e. both a and b.
Consider the following regression model: yi= 
0+ 1xi + ui. If the first four Gauss-Markov assumptions hold true, and the error term contains heteroskedasticity, then _____.
A. Var(ui|xi) = 0
B. Var(ui|xi) = 1
C. Var(ui|xi) = 
i2
D. Var(ui|xi) = 
Proprietors' income is
A. the income of partnerships. B. the income of sole proprietorships. C. the income of unincorporated businesses. D. the income of all businesses-incorporated and unincorporated.