Suppose an oligopoly consists of two firms. Firm A lowers price and Firm B responds by lowering its price by the same amount. If average costs and industry output remain the same, which of the following will occur?
A) The profits of the two firms will increase.
B) The profits of the two firms will decrease.
C) The profits of the two firms will remain the same.
D) Barriers to entry will come tumbling down and new firms will enter.
B
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Suppose that a study is released stating that the fewer books people read, the more velvet paintings they tend to own. This is best described as an example of
A. positive correlation. B. negative correlation. C. positive causation. D. negative causation.
If banks faced a 100 percent reserve requirement, a decrease in banking reserves of $4 million would: a. increase the money supply by $4 million
b. increase the money supply by $400 million. c. decrease the money supply by $4 million. d. decrease the money supply by $400 million.