The fallacy of composition is the incorrect view that
a. everything else is always held constant when a change occurs.
b. a small change in an economic variable will have unrecognizable but significant consequences on the economy.
c. when two events are associated, the one observed first must have caused the second.
d. if something is true for an individual, then it must also be true for the group.
D
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The idea that aggregate price levels do not affect real outcomes in the economy is called the:
A. neutrality of money. B. aggregate price theory. C. neutrality of prices. D. real output theory.
Price fixing is collusive and illegal under U.S. antitrust laws. Predatory pricing, price discrimination, and tying have less obvious effects and are sometimes practiced by non- colluding oligopolists. Describe at least two of these strategies and explain the circumstances under which they raise regulatory concern.
What will be an ideal response?
If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent,
A. New cars are an inferior good, and the income elasticity is +0.5. B. New cars are a normal good, and the income elasticity is +2.0. C. New cars are a normal good, and the income elasticity is +.5. D. New cars are an inferior good, and the income elasticity is +2.0.
The demand curve that a monopolist faces is:
A. the market demand curve. B. the same as the demand curve that faces a perfectly competitive firm. C. not affected by changes in the prices of other goods. D. generally flatter than the demand curve that faces a perfectly competitive firm.