The Following Diagram Shows a "Reaction Function" Graph for Two

question 28

Multiple Choice

The following diagram shows a "reaction function" graph for two firms selling in an export market, where HH is the home firm's reaction function and FF is the foreign firm's reaction function. Reaction function HH reflects the fact that, if the foreign firm increases its quantity sold in this market, then the home firm will __________ its sales level in the market; reaction function FF reflects the fact that, if the home firm increases its quantity sold in this market, the foreign firm will __________ its sales level in the market.

• A) decrease; decrease
• B) decrease; increase
• C) increase; decrease
• D) increase; increase

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Definitions:

Urban Settings

Refers to areas characterized by high population density, infrastructure development, and a predominance of non-agricultural activities, such as cities or towns.

Chicago School

A school of economic thought associated with the University of Chicago, known for its strong belief in free-market capitalism and minimal government intervention in the economy.

Demographic Transition

The demographic transition is a theory describing the transition from high birth and death rates to lower birth and death rates as a country develops from a pre-industrial to an industrialized economic system.

Evidence Supports

When empirical data or factual information validates or backs up a hypothesis, claim, or theory.