What phenomenon does the kinked demand theory attempt to explain? What assumptions does it make? Finally, what criticism has been leveled against the theory?
The kinked demand theory attempts to explain price rigidity in oligopoly. It assumes that rivals will follow
a firm's price reduction, but not a price increase. The criticism is that the theory does not explain how the
initial price and output are determined.
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If the elasticity measure equals 3.5, then the demand is
A) elastic. B) unit elastic. C) inelastic. D) infinitely elastic.
In the long run, if the output of a firm is zero then its total cost will be equal to its total fixed cost
a. True b. False Indicate whether the statement is true or false
Which of the following examples would most likely use advertising?
a. A firm sells a product with low differentiation. b. A firm sells a homogeneous product. c. A firm sells a product with many substitutes. d. A firm sells a product with few substitutes.
The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of
A) real investment and interest rate B) real disposable income and unemployment C) real national output and the price level D) government expenditures and taxes E) imports and exports