If an incumbent cannot commit and faces an identical potential entrant with relatively high fixed costs that are below the level where entry is blockaded, the incumbent will
A) produce the Cournot duopolist level of output.
B) produce the Stackelberg leader level of output.
C) set price equal to marginal cost.
D) produce a level of output that is greater than the Stackelberg leader level of output.
D
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A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely
A. increase the purchase of meals by 10 percent. B. increase the purchase of meals by less than 10 percent. C. decrease the purchase of meals by more than 10 percent. D. decrease the purchase of meals by less than 10 percent.
An oligopoly would tend to restrict output and drive up price if
a. barriers to entering the industry are negligible. b. firms engage in informative advertising. c. firms produce a standardized product. d. firms collude and behave like a monopoly.
Output for a simple production process is given by Q = KL, where K denotes capital and L denotes labor. The price of labor is $10 per unit and the price of capital is $2 per unit.If at the current level of production the marginal product of labor is 4 while the marginal product of capital is 2, then in order to minimize your costs of production you should use
A. more of both inputs. B. the same amount of both inputs. C. more capital and less labor. D. more labor and less capital.
Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary