Exhibit 10-4 Kinked demand curves
In Exhibit 10-4, the exhibit represents a kinked-demand oligopoly model. Suppose the current price is $50. If one firm in the oligopoly now attempts to raise price, all firms will:
A. follow along demand curve D1.
B. follow along demand curve D2.
C. ignore this price increase and cause the price-raising firm to move along D1.
D. ignore this price increase and cause the price-raising firm to move along D2.
Answer: C
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A price may be sticky because
A) of monetary policy. B) of menu costs. C) of total factor productivity shocks. D) of the monetary illusion.
Exhibit 6-10 Short-run cost schedule for book publisher's hourly production TotalOutput TotalVariable Cost TotalCost 0 cases of books $ 0 $200 1 100 300 2 150 350 3 250 450 4 450 650 In Exhibit 6-10, the marginal cost of increasing production from 2 to 3 cases of books is:
A. higher than the marginal cost of increasing production from 1 to 2 cases of books, so the marginal cost curve must be rising in between 2 and 3 cases. B. higher than the marginal cost of increasing production from 1 to 2 cases of books, so the average total cost must be rising in between 2 and 3 cases. C. lower than the marginal cost of increasing production from 1 to 2 cases of books, so the marginal cost must be greater than average total cost between 2 and 3 cases. D. lower than the marginal cost of increasing production from 1 to 2 cases of books, so the average total cost must be rising in between 2 and 3 cases.