The effects of a price change are always understated by a partial-equilibrium analysis when compared to a general-equilibrium analysis
Indicate whether the statement is true or false
False. If the price change affects other markets, the partial-equilibrium analysis will be different than the general-equilibrium. However, the results may be smaller or larger under either analysis.
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Four propane delivery firms have a tacit agreement to charge a service fee of $50 in addition to $5 per gallon of propane. If the firms' cost of propane increases and one of the four firms advertises that it will increase the service fee to $75 and raise the cost of a gallon of propane to $5.50 next month, this is an example of ________.
A) a preannouncement B) price leadership C) a meet-the-competition clause D) a precommitment
The conditions in which vertical relationships can enhance a firm's ability to price discriminate include
a. the manufacturer's product is of value to just one type of customer b. the costs of arbitraging the price difference across markets is small c. the manufacturer acquires the distributer in the higher priced market d. competition provides little ability for the manufacturer to price above marginal cost
Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? a. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. b. Their positive statements help
us understand the good results of a policy change, and their normative statements help us understand the negative results. c. We really do not have to worry about them since trained economists never make normative statements. d. Economists are always making assumptions, and policy should not be based on assumptions.
Under rate-of-return regulation, average cost pricing
A) is inflated so the firm can make economic profits. B) includes variable costs but not a cost for capital. C) includes what they consider to be a fair rate of return on investment. D) includes a cost for capital that generates an above normal rate of return.