Suppose two firms in a duopoly implicitly collude and charge a high price. How might each firm benefit from advertising that it will match the lowest price offered by its competitor?
A) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.
B) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion.
C) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same.
D) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact.
C
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The above table has the balance of the University National Bank. All figures are in millions of dollars. The desired reserve ratio is 20 percent. What would be the total increase in loans at this bank if all excess reserves were loaned out?
A) $528 million B) $352 million C) $232 million D) $0
Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping
What will be an ideal response?