What assumption(s) is (are) necessary to generate a kinked demand curve?
a. all firms in the industry ignore the price changes made by any one firm
b. any price decrease will be ignored but price increases will be followed
c. all firms will follow a price decrease but will ignore any price increase
d. all price changes made by any firm will be followed by all of the other firms
e. price can increase, but not decrease
C
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Suppose the government imposes rent control (a price ceiling) below the equilibrium price for rental housing. Which of the following could result?
a. Tenants risk breaking rent control law. b. The quality of existing rental housing deteriorates. c. Shortages. d. All of these.
In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?
A. Those who deeply dislike business risk will not have anything to do with the business B. This allows firms to more easily attract labor and other suppliers of inputs C. This reduces the business risk in the economy D. It makes it easier for the government to monitor and manage the business risk