There is much evidence to suggest that airlines are more likely to match price cuts than price increases. Which of the following best explains this evidence?
A) No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases.
B) An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals.
C) The law of demand which states that an increase in price leads to a decrease in quantity demanded.
D) Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease.
B
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In the above figure, if the economy is at equilibrium at E1, the Fed would most likely
A) attempt to lower the aggregate demand in the economy. B) attempt to lower the price level below 120. C) adopt an expansionary monetary policy. D) adopt a contractionary monetary policy.
It is appropriate to use the supply-and demand-model if, in a market,
A) everyone is a price taker with full information about the price and quality of the good. B) firms sell identical products. C) costs of trading are low. D) All of the above.
Which of the following is a method of reducing the poverty trap?
a. Imposing requirements for work as a condition of receiving benefits b. Ensuring that government benefits are increased gradually over time c. Reducing government benefits by an amount equal to income earned d. Providing a guaranteed minimum income for all needy recipients
All of the following schools of economics advocate small government in all circumstances as the best policy, except
A. Keynesian. B. Classical. C. Monetarists. D. Supply Side economics.