Explain the significance of the price elasticity of demand along the kinked demand curve.
What will be an ideal response?
The kinked demand curve assumes that competing firms will ignore one firm’s price increases and imitate its price decreases. Therefore, demand for the single firm’s output is elastic for price increases and inelastic for price decreases. This makes price competition unprofitable for the individual firm since both price increases and price decreases lead to lower total revenue. Under these conditions, there is little incentive for the individual firm to change its price or output. Such oligopolies tend to have stable prices and to emphasize non price competition—especially product differentiation and advertising.
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________: the monetary value of a nation's merchandise exports minus the value of merchandise imports for a given period of time
Fill in the blank(s) with correct word
As a firm hires more workers, holding capital and other factors constant, the marginal physical product of labor declines because
A. the amount of other inputs each worker has to work with declines as the number of workers increases. B. there are diseconomies of scale. C. less efficient workers are hired as the number of workers increase. D. workers don't perform well in teams.
Mainstream economists think that:
A. Market participants change their actions in response to anticipated price-level changes such that no change in real output occurs B. The economy self-corrects when unanticipated events divert it from its full-employment level of real output C. The downward inflexibility of wages and prices may leave the economy stuck in a costly recession for long periods D. Significant changes in technology and resource availability cause macroeconomic instability
What are the categories of expenditure used in the expenditure approach to measuring GDP?
What will be an ideal response?