Why do increasing returns to scale in an industry make it more likely that the industry will be oligopolistic rather than perfectly competitive?
What will be an ideal response?
Economies of scale lead to lower cost as size of operations increase. Thus many sellers cannot survive because the market is not large enough for all to reach the low cost levels of output. Early entrants in the market will have low cost output and sell to a large share of the market. They could threaten to lower price below a new entrant's costs and, if the threat is credible, new firms will not risk entering the market. Unless some new technology exists or a firm has resources to win a price war it may not be wise to enter. This leads to few firms in such a market and the environment is receptive to the oligopoly models discussed in this chapter.
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Huntington said that future conflict will be based on:
a. economics b. ideology c. geography d. differences in civilizations e. all of the above
A policy of "beggar-thy-neighbor" is a policy that
A) often benefits the home country in the long run. B) often benefits the foreign country in the long run. C) often benefits foreign country in the short run. D) does not often benefits any country in the long run. E) benefits the home country's neighbors in the long run.
The new endogenous growth theory concludes that sustained economic growth in a country comes from the interaction of labor, investments in physical and human capital, and what is perhaps the key ingredient:
A) natural resources. B) the production of ideas. C) post-secondary education within that country. D) immigration into that country.
The term "bottleneck" refers to
a. when increasing variable inputs must share a fixed amount of complementary input. b. "fixity" of some factor c. None of the above d. Both a and b