The kinked-demand curve model helps to explain price rigidity because:
A. there is a gap in the marginal revenue curve within which changes in marginal cost will not
affect output or price.
B. demand is inelastic above and elastic below the going price.
C. the model assumes firms are engaging in some form of collusion.
D. the associated marginal revenue curve is perfectly elastic at the going price.
Answer: A
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In the two-period model, r denotes
A) real income. B) the nominal interest rate. C) the real interest rate. D) current taxes.
The country that did NOT opt out of the currency union is:
A) United Kingdom. B) Sweden. C) Denmark. D) Italy.
When consumers maximize utility, they are equating the ratio of marginal utility to price across all goods consumed.
Answer the following statement true (T) or false (F)
If a good is imported into (small) country H from country F, then the imposition of a tariff In country H
A) raises the price of the good in both countries (the "Law of One Price"). B) raises the price in country H and does not affect its price in country F. C) lowers the price of the good in both countries. D) lowers the price of the good in H and could raise it in F. E) raises the price of the good in H and lowers it in F.