In contestable markets A. large firms earn positive profits. B. large firms set

Question

In contestable markets

A.

large firms earn positive profits.

B.

large firms set price like monopolists.

C.

prices are pushed down to the bottom of the long-run average cost curve.

D.

oligopolistic firms exercise market power.

There is considerable dispute among economists regarding the proper role of government in dealing with large, concentrated industries.

A.

Often, in the absence of government action, large firms and product differentiation lead to inefficient allocation of social resources.

B.

In some cases, the strongest barriers to entry, and hence considerable inefficiency, result from government actions.

C.

If markets are "contestable," even concentrated industries can produce efficiently.

D.

Often, government action is needed to reduce barriers to entry that can lead to inefficient allocation of social resources.

E.

All of the above.

Empirical evidence shows that important technological advances are achieved

A.

mostly by small independent firms.

B.

mostly by large firms in concentrated industries.

C.

both by small independent firms and by large firms in concentrated industries.

D.

mostly by large firms in unconcentrated industries.

Shown at right is a payoff matrix for a price-cutting decision by Honda and Nissan. Payoff Matrix for Price Cutting Decisions Nissan does not have a dominant strategy. than $11 million and $4 million is less than $10 million. than $4 million and $11 million is greater than $10 million. greater than $3 million and $12 million is greater than $10 million. O A. Cut Price -- HondaDon't Cut Price O B. Nissan's dominant strategy is to not cut price, because $6 million is less O C. Nissan's dominant strategy is to cut price, because $6 million is greater O D. Honda's dominant strategy is to not cut price, because $6 million is 0 E. Honda does not have a dominant strategy. $6 million $3 million $6 million $11 million $12 million $10 million $4 millio $10 million Click to select your answer o que 25 MacBook Pro 80 O00 o00 6 8 0

Explanation / Answer

1. In contestable markets

C.prices are pushed down to the bottom of the long-run average cost curve.

2.There is considerable dispute among economists regarding the proper role of government in dealing with large, concentrated industries

E. All of the above.

3.Empirical evidence shows that important technological advances are achieved

C.both by small independent firms and by large firms in concentrated industries.

4.Shown at the right is a payoff matrix for a price-cutting decision by Honda and Nissan.

C.Nissan's dominant strategy is to cut price, because $6 million is greater than $4 million and $11 million is greater than $10 million.

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