Which of the following would make it easier to maintain an effective collusive agreement in a cartel? A) An increase in the number of potential entrants into the industry. B) A decrease in the elasticity of demand for the cartel’s product. C) An increase in the number of substitutes for the product produced by the […]
If the cross-price elasticity of demand between two goods is positive, we can assume that the two goods in question are: A) complements. B) substitutes. C) inferior goods. D) totally unrelated to one another. ANSWER B
The list of the major factors that create economies of scale includes all of the following except: A) specialization and division of labor. B) quantity discounts. C) an increase in demand for the firm’s output. D) the use of automation devices. ANSWER C
All else constant, an increase in the amount of government spending on roads and bridges would cause GDP in the domestic economy to increase. Indicate whether the statement is true or false ANSWER TRUE
Consumer income can be used for three things: purchases of goods and services, paying taxes and saving. Indicate whether the statement is true or false ANSWER TRUE
A firm could gain from cheating on a cartel agreement by doing all of the following except: A) raising its price above the agreed level. B) lowering its price below the agreed level. C) selling more than its agreed quota. D) increasing production. ANSWER A
Generally speaking, the inclusion of transportation costs in the total costs of production has the effect of causing the LRAC curve to: A) shift down. B) flatten out. C) shift up. D) become steeper over the range on economies of scale. ANSWER C
Which of the following statements regarding cartels is not correct? A) Cartels are sometimes difficult to maintain because a member can cheat by raising its price above the agreed price. B) Cartels restrict industry output in order to raise price. C) Cartels are inherently stable, because oligopolistic firms rarely change price. D) are easier to […]
Gross Domestic Product (GDP) is defined as the market value of all goods and services purchased in the economy during a particular year. Indicate whether the statement is true or false ANSWER FALSE
Household consumption primarily depends on: A) disposable income. B) the interest rate. C) marginal propensity to import. D) credit card debt. ANSWER A
