Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market. The firm caters to the global market and earns a profit of $10 million. Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about $4 million
However, a government subsidy allows Flettner to enter the helicopter market and Cicare incurs a loss of $4 million due to its entry. Eventually, Flettner evolves as the monopoly supplier of helicopters while Cicare is forced to shut down. This conclusion rests on which of the following assumptions?
a. The German government was experiencing a budget surplus.
b. There was low demand for Cicare automobiles in the world market.
c. The German government was able to forecast accurately the subsidy required to induce Flettner to produce helicopters.
d. The quality of Flettner's helicopters were inferior compared to that of Cicare's.
e. Cicare diversified into the production of automobiles.
c
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A) macroeconomic analysis. B) irrational behavior. C) normative economic analysis. D) positive economic analysis.
Marginal utility is negative only when quantity demanded is negative
a. True b. False
Karl Marx said that whoever controlled a society's __________ controlled that society.
Fill in the blank(s) with the appropriate word(s).
Which of the following is correct?
a. Well designed tax cuts can increase investment which fluctuates more than consumption over the business cycle. b. Well designed tax cuts can increase investment but it fluctuates less than consumption over the business cycle. c. Tax cuts have little effect on investment which fluctuate more than consumption over the business cycle. d. Tax cuts have little effect on investment but it fluctuates less than consumption over the business cycle