Price leadership represents a situation where oligopolistic firms:
A. conspire to form a cartel.
B. informally collude.
C. face a kinked-demand curve.
D. reduce their reliance on nonprice competition.
Answer: B
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Perfect competition and monopolistic competition are similar in that firms in both types of market structure will
A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters.
The problem of asymmetric information that brings about a general decline in product quality in an industry is
A. the lemons problem. B. a market failure. C. the result of government regulation. D. creative response.
Both Claudia and Javier are certified educators. Claudia makes $55,000 a year working as a teacher in a public high school in Chicago. Javier makes $40,000 working as a grade school teacher in a private school in Chicago. Which of the following is true?
A. Javier is clearly worse off than Claudia, because he earns $15,000 a year less. B. Javier must be better off than Claudia if he is willing to take a job at $15,000 a year less than Claudia. C. Even though income is an imperfect measure of well-being, Claudia and Javier must be equally well off because either is free to switch jobs. D. From this information it cannot be determined who is better off because income is an imperfect measure of well-being.
If the nominal interest rate on a one-year loan was 7%, the actual inflation rate over the year was 3% and the expected inflation rate over the year was 2.5%, then the expected real interest rate equals
A. 3.75%. B. 3.5%. C. 4.5%. D. 4.0%.