Over time, the price of personal computers has fallen dramatically. All else constant, this would lead us to expect that demand for personal computers has become more price elastic. Indicate whether the statement is true or false ANSWER FALSE
All else constant, an increase in the level of competition among firms would be expected to reduce the amount of X-inefficiency that exists in a particular industry. Indicate whether the statement is true or false ANSWER TRUE
Which of the following would cause a change in supply, as opposed to a change in quantity supplied, in the market for used homes? A) A decrease in the price of rental housing. B) A decrease in the mortgage rates. C) An increase in the incomes of home buyers. D) An increase in the number […]
The overriding objective of a cartel is to maximize the amount of profit each of its members can earn through cooperation with the other members. Indicate whether the statement is true or false ANSWER FALSE
In the case of Matsushita v. Zenith, the fact that the foreign television manufacturers were able to charge lower prices than their domestic competitors in the U.S. market for televisions was sufficient evidence to conclude that the Japanese firms were engaged in predatory pricing. Indicate whether the statement is true or false ANSWER FALSE
Stock market wealth decreases. What is the impact on aggregate expenditures and income? A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases. ANSWER B
When calculating the arc elasticity of demand, the percentage change in price (quantity) should be based on the average of the starting and ending prices (quantities). Indicate whether the statement is true or false ANSWER TRUE
Which of the following statements is correct? A) A change in demand or supply can only be caused by a change in price. B) A simultaneous decrease in demand and increase in supply will result in an increase in equilibrium price and uncertain effect on quantity. C) If price is currently above equilibrium, market adjustments […]
Assume that the U.S. dollar depreciates against the Japanese yen. What is the impact on aggregate expenditures and income? A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases. ANSWER A
Assume a firm has decided to undertake a limit pricing strategy. For the strategy to be successful, the firm does not need to actually possess a cost advantage over potential entrants. Rather, the firm simply has to be able to convince potential entrants that it does, in fact, possess an advantage. Indicate whether the statement […]