When one automaker begins offering low cost financing or rebates, others tend to do the same. What two oligopoly models might offer an explanation of this behavior?
What will be an ideal response?
(1 ) Kinked demand curve: the assumption behind the kinked demand curve model is that rivals follow price decreases but not price increases. One automaker offering rebates, etc., is essentially a price cut, and so others will follow. (2 ) Price leadership: This could also be viewed as a price leader setting a new price and others following.
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Allocative efficiency is achieved when the marginal benefit of a good
A) exceeds the marginal cost by as much as possible. B) exceeds the marginal cost, but not by as much as possible. C) is less than the marginal cost. D) equals the marginal cost. E) equals zero.
The typical short-run production function is incapable of distinguishing among the different types of labor that might be hired by the firm
Indicate whether the statement is true or false
A long-term loan that is given to a firm is known as a
A) share of stock. B) bond. C) dividend. D) random walk.
Answer the following statements true (T) or false (F)
1. The point where the supply curve and the demand curve cross is called the equilibrium. 2. Good weather is an example of a natural condition that affects supply for salmon fishing. 3. The equilibrium quantity is the common quantity where the amount of the product consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied). 4. Laws that governments enact to regulate prices are called price barriers. 5. One typical way that economists define efficiency is when it is possible to improve the situation of one party without imposing a cost on another.