1) If a profit-maximizing oligopolist has a kinked demand curve, then a downward
ID: 1187296 • Letter: 1
Question
1) If a profit-maximizing oligopolist has a kinked demand curve, then a downward shift in its marginal cost curve:
a. might not affect output or price.
b. increases output or price, but not both.
c. reduces both output and price.
d. reduces output but not price.
2)Collusive control over price may permit oligopolists to:
a. Use new technology, achieve economies of scale, and get government subsidies
b. Achieve economies of scale, reduce costs, and prevent price cheating
c. Increase product demand, increase product supply, and lower cost
d. Reduce uncertainty, increase profits, and possibly limit entry of new firms
3)If a particular bank regularly announces changes in its interest rate schedules before its competitors, which then set rates very close to those announced by that bank, this could be described as:
a. Markup pricing
b. Predatory pricing
c. Price leadership
d. Explicit price collusion
4) Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. In this case, the firm perceives its demand curve to be:
a. kinked, being steeper above the going price than below.
b. kinked, being steeper below the going price than above.
c. linear, being less elastic at lower prices.
d. linear, being more elastic at higher prices.
5) If a profit-maximizing oligopolist has a kinked demand curve, then a downward shift in its marginal cost curve:
a. might not affect output or price.
b. increases output or price, but not both.
c. reduces both output and price.
d. reduces output but not price.
Explanation / Answer
1)a
2)c
3)d
4)b
5)c
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