Collusion refers to a situation where rival firms decide to
A. agree with each other to set prices and output.
B. cheat on each other.
C. compete aggressively against each other.
D. combine their operations and merge with each other.
Answer: A
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If you know the cross elasticity between two goods is negative, then you know the goods are
A) substitutes. B) normal goods. C) complements. D) inferior goods. E) inelastic goods.
Which of the following assumptions were made by the Cournot model of oligopoly?
a. Each seller psychoanalyzes the competition and decides how to react in all possible situations. b. Each seller psychoanalyzes the competition and exactly predicts the output decisions of the competitors. c. Each seller chooses its own output and believes the others in the market will respond to its choices. d. Each seller chooses its own output and believes the others in the market will not respond to its choices.
What happens if the price received by a perfectly competitive firm causes it to produce at a quantity where price equals average cost?
a. The firm earns a profit. b. The firm earns no profit. c. The firm earns losses. d. The firm earns little profit.
The government bailed out banks deemed too big to fail through all of the followings except:
A. the Troubled Asset Relief Program, commonly known as TARP. B. increased government spending. C. breaking them to several entities. D. fiscal policy.