Why is it difficult for an oligopolist to determine its profit-maximizing price and output?
It is difficult to predict how firms will react in situations of mutual interdependence. No firm knows what its demand curve looks like with any degree of certainty, and therefore it has a limited knowledge of its marginal revenue curve. To know anything about its demand curve, the firm must know how other firms will react to its prices and other policies. In the absence of additional assumptions, then, equating marginal revenue and expected marginal cost is relegated to guesswork. Thus, it is difficult for an oligopolist to determine its profit-maximizing price and output.
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The measure of GDP which effectively updates the prices for the base year each year and reduces the errors from changes in relative prices and the introduction of new goods and services is called the
A) nominal GDP. B) real GDP. C) deflated GDP. D) chain-weighted GDP.
The equation below gives the degree of economies of scope (SC):
SC = (C(Q1 ) + C(Q2 ) - C(Q1,Q2 )) / C(Q1,Q2 ) where C(Q1 ) is the cost of producing output Q1, C(Q2 ) is the cost of producing output Q2, and C(Q1,Q2 ) is the joint cost of producing both outputs. If SC is negative: A) there are neither economies nor diseconomies of scope. B) there are economies of scope. C) there are diseconomies of scope. D) there are both economies and diseconomies of scope.