Unit Labor Costs, the Rate of Inflation, the Level of Foreign

question 116

Multiple Choice

Unit labor costs, the rate of inflation, the level of foreign competition, and the capacity utilization rate were variables tested by Finkel and Tuttle as determinants of the

• A)Balance of payments.
• B)The exchange rate.
• C)Aggregate operating profit margin.
• D)Aggregate profit margin.
• E)Aggregate cost margin.

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Definitions:

Price Leadership

A situation where one dominant company in an industry sets the price of goods or services, which other companies then follow.

Marginal Cost

The increase in total cost that arises from an additional unit of production.

Average Total Cost

Average total cost is the total cost of production divided by the number of units produced, indicating the cost per unit.

Price War

Successive, competitive, and continued decreases in the prices charged by firms in an oligopolistic industry. At each stage of the price war, one firm lowers its price below its rivals’ price, hoping to increase its sales and revenues at its rivals’ expense. The war ends when the price decreases cease.