Refer to Figure 25.1 for an oligopoly firm. Assume that the existing price and quantity are $10 and 2,000 units. Which of the following statements is most likely correct?
A. Demand curves D1 and D2 both assume that rivals will not match any price changes.
B. Demand curve D1 assumes that rivals match any price changes.
C. Demand curves D1 and D2 both assume that rivals match any price changes.
D. Demand curve D2 assumes that rivals match any price changes.
Answer: B
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Which of the following non-OPEC nations have raised and lowered production in step with the OPEC nations, thus making the cartel more effective?
A. Venezuela and Nigeria B. Iran and Iraq C. Mexico and Norway D. Mexico and the United States
Excess reserves are:
A. Bank reserves in excess of required reserves. B. Legal reserves in excess of lending reserves. C. Transactions deposits plus traveler's checks. D. Total reserves plus deficient reserves.
An example of something that might be sold in the underground economy is:
A. baby-sitting services. B. lawn-mowing services. C. endangered animals. D. All of these could be exchanged in the underground economy.
The reason that stagflation tends to follow an inflationary gap is that
A. output tends to fall even as prices continue to rise as part of the self-correcting mechanism. B. government officials tend to overact in controlling inflation. C. businesses try to increase profits by raising prices and increasing output. D. workers accept pay cuts to maintain employment.