Under what conditions would firms be likely to support an industry-wide advertising ban?
What will be an ideal response?
If advertising only takes share away from rivals, the firms in the industry are better off if advertising is banned. Yet, if advertising is not banned, their dominant strategy is to advertise. This Nash equilibrium of all firms advertising, however, does not yield maximum joint profits.
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The above figure gives your budget line between CDs and magazines. Which of the following changes would NOT allow you to buy more CDs?
A) a decrease in the relative price of CDs B) an increase in income C) a decrease in the price of magazines with no change in the price of CDs D) None of the above answers is correct because all of the above changes allow you to buy more CDs.
Two firms would sometimes be better off if they got together and agreed to charge a high price, rather than to compete and risk having to charge a lower, competitive price. What is the greatest deterrent to this strategy?
A) One of the firms may decide to lower its price and take business away from the firm that charged the high price. B) The firms may find that the price they charge is greater than the price that would maximize their profits. C) An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail. D) Consumers may resent having to pay high prices and not buy from either of the firms.
How might a clothing store differentiate itself from its competitors? List at least three ways
The short-run aggregate supply curve has a(n) ________ slope because as prices of ________ rise, prices of ________ rise more slowly
A) positive; final goods and services; inputs B) infinite; final goods and services; inputs C) positive; inputs; final goods and services D) infinite; inputs; final goods and services