Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?
What will be an ideal response?
Since stereo equipment is a complementary good to CDs, a decrease in the price of stereo equipment causes the demand for CDs to increase. The increase in labor costs causes the supply of CDs to decrease. The price of CDs will increase, but the quantity sold in the market could increase, decrease, or remain the same. The quantity effect depends on how much demand increased relative to how much supply decreased.
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The Clayton Act is an antitrust law that was passed to
A) outlaw monopolization. B) prohibit charging buyers different prices if the result would reduce competition. C) address loopholes in the Sherman Act. D) toughen restrictions on mergers by prohibiting mergers that reduce competition.
Why would a firm rather a company like J.D. Power (which provides product satisfaction reviews) review its product than doing it within the firm?
A) J.D. Power provides less credibility. B) J.D. Power provides greater credibility. C) J.D. Power is more honest than the average firm. D) J.D. Power has a government monopoly in providing product satisfaction reviews.