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 […]
Studies and recent experience suggest that there is considerable potential for substitution between doctors and nurses in the production of health care services. Indicate whether the statement is true or false ANSWER TRUE
Consider the market for gasoline in a moderately large city. All else constant, it would be reasonable to conclude that the price elasticity demand for any individual gas station would be higher (more elastic) than the price elasticity of demand for gas in general. Indicate whether the statement is true or false ANSWER TRUE
All else held constant, an increase in foreign imports of cameras would cause the supply of cameras in the United States to: A) increase. B) stay the same. C) decrease. D) cannot be determined with the information given. ANSWER A
Assume that in an effort to discourage competitors, firm X has lowered its price below its average total costs of production. This is an illustration of the limit pricing form of strategic entry deterrence. Indicate whether the statement is true or false ANSWER FALSE
Assume the players in a game have reached a Nash equilibrium. It is then reasonable to assume that each player has chosen its dominant strategy. Indicate whether the statement is true or false ANSWER FALSE
As the amount of time a consumer has to adjust to a change in price increases, so does the price elasticity of demand for a good. Indicate whether the statement is true or false ANSWER TRUE
Assume that when the price of good X is $12, quantity demanded is 32. When price is decreased to $9, quantity demanded increases to 45. Based on this information, over the range in question demand is elastic. Indicate whether the statement is true or false ANSWER TRUE
Personal income taxes are reduced as part of an expansionary fiscal policy. 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
All else constant, a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm’s production process. Indicate whether the statement is true or false ANSWER TRUE
