Although tacit collusion can enhance the price-setting power of the participating firms, it can also result in greater efficiency in production, which also benefits society. Thus, it is not immediately clear, a priori, when tacit collusion actually hurts or helps consumers. Indicate whether the statement is true or false ANSWER TRUE
For a linear demand function, slope and the price elasticity of demand are equal. Indicate whether the statement is true or false ANSWER FALSE
Assume a cartel that consists of two firms has determined its profit-maximizing level of output and must now decide how to allocate total output between the two firms. Assuming firm A’s marginal costs are less than firm B’s marginal costs, firm A should produce a smaller share of total output than firm B. Indicate whether […]
One of the major motivations for labor resistance to productivity enhancing changes in a production process is the resulting threat to job security. Indicate whether the statement is true or false ANSWER TRUE
When demand is perfectly inelastic with respect to price, the demand curve is horizontal. Indicate whether the statement is true or false ANSWER FALSE
Because cooperation dominates noncooperation as a strategy for maximizing profits, cheating is rarely if ever an issue that cartels have to contend with. Indicate whether the statement is true or false ANSWER FALSE
Assume that in the market for plasma TVs there is an increase in supply. The result will be: A) an increase in equilibrium price and quantity. B) a decrease in equilibrium price and quantity. C) an increase in equilibrium quantity and uncertain effect on equilibrium price. D) a decrease in equilibrium price and increase in […]
The open economy multiplier is calculated as follows: A) 1/[1-(marginal propensity to consume + marginal propensity to invest)] B) 1/[1-(marginal propensity to consume + marginal propensity to import)] C) 1/[1-(marginal propensity to consume + marginal propensity to invest + marginal propensity to import)] D) 1/[1-(marginal propensity to consume + marginal propensity to invest – marginal […]
An increase in the number of people in the United States with health insurance could cause the cost of providing health care services to increase as the incentive for health care providers to minimize costs decreases. Indicate whether the statement is true or false ANSWER TRUE
Assume the income elasticity for a particular good has been estimated to be -0.68. Based on this information, we can infer that the good is inferior and a necessity. Indicate whether the statement is true or false ANSWER TRUE
