Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.
What will be an ideal response?
Cartel cheating is more likely if there are many firms, as it’s difficult to monitor an agreement and see when sales are lost to a rival. Product heterogeneity also adds to cartel difficulties, since firms can vary quality to attract customers at a given price. If all firms sell an identical product, cheating is easier to detect.
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The cross-price demand curve for Cobb-Douglas tastes is perfectly vertical.
Answer the following statement true (T) or false (F)
Which of the following is NOT true about this national income equation:
A) For the current account, CA, to improve, we may have to invest less than otherwise would be the case. B) For the current account, CA, to improve, we may have to save more to maintain the same amount of investment that includes foreign saving. C) For the current account, CA, to improve, the government may have to run budget surplus. D) A reduction in the trade deficit with one country will simply show up as an increase in a trade deficit with another country. E) None of the above.
Markets coordinate economic activity through:
A. commanding individuals what to do. B. the price mechanism. C. the legal mechanism. D. asking individuals what to do.
When total revenue minus total cost is equal to zero, the firm is:
A. earning above-average economic profit. B. earning a normal profit. C. losing too much money to stay in business. D. earning abnormally low profits.