Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. At the extreme right end, all 100 voters lie to the left. 
Suppose Candidate X is running against Candidate Y. If Candidate Z enters the race:
A. all of the voters who were going to vote for Y will now vote for Z.
B. X will win because Y and Z will be competing for the same voters.
C. approximately half of the voters who were going to vote for X will now vote for Z.
D. most of the voters who were going to vote for Y will now vote for Z.
Answer: D
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Suppose an industry consists of 20 firms. Each firm's share of total sales in the industry is 5 percent. If two of the firms merge, then the four-firm concentration ratio in the industry will
A) remain unchanged. B) decrease as there are fewer firms in the industry. C) increase. D) depend on the market condition faced by the industry.
An increase in nonlabor income leads to
a. a fall in the quantity of labor supplied and in consumption. b. a fall in the quantity of labor supplied but an increase in consumption. c. an increase in the productivity of labor. d. a fall in the wage rate.