What are the assumptions of the kinked demand curve model? What is its main conclusion about oligopoly behavior?
The model has two main assumptions: The firm believes that rivals will match a price cut, and the firm believes that rivals will ignore a price increase. The result is that demand is much more elastic above the current price (because sales volume will drop off quickly if rivals do not match a price increase), and fairly inelastic below the current price (rivals will cut price to prevent the firm from increasing market share). The main conclusion of the model is that oligopolists will tend to stick to their current prices unless there is a dramatic shift in demand and/or cost.
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Thrift institutions include
A) banks, mutual funds, and insurance companies. B) savings and loan associations, mutual savings banks, and credit unions. C) finance companies, mutual funds, and money market funds. D) pension funds, mutual funds, and banks.
Relative to a franchisee, a manager of a company owned store is more likely to
a. Work very hard b. Not work as hard c. Work only evenings d. Work only night shifts
Ponzi schemes are investments in which:
A. funds are invested solely in high-risk foreign financial assets. B. all investors are guaranteed to lose money. C. investors are unknowingly paid returns from funds contributed by new investors. D. the profitability of the investments depends on whether the economy grows or is in recession.
When the percentage change in the quantity demanded is less than the percentage change in price, then demand is
A) inelastic. B) unit elastic. C) elastic. D) irrelevant. E) undefined.