Is it likely that oligopolistic firms will be in both a kinked demand curve situation and also engage in price leadership? Why or why not?
No, it is not. The models are not compatible in their assumptions. Specifically, price leadership assumes that rivals will follow a price increase, while the kinked demand curve model assumes that rivals will not follow such a lead. Because of the incompatibility, it is impossible for an oligopoly to conform to both models at the same time.
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Explain how public goods provided by the federal government differ from public goods provided by the state and local governments
What will be an ideal response?
An above full-employment equilibrium is
A) a theoretical possibility but cannot happen in reality. B) the equilibrium in which the economy is in most of the time. C) when real GDP exceeds potential GDP. D) the period of time when prices are falling.
Explain how a distorting tax can improve efficiency when there are already present other taxes that distort decisions as well
What will be an ideal response?
Once a monopolistically competitive firm innovates, it is likely that:
A. it will enjoy long-run profits. B. other firms will rush to create similar, highly substitutable goods. C. it will need government protection to earn enough to cover its R & D costs. D. None of these is likely to happen.