Which of the Following Should Be Kept in Mind When

question 35

Multiple Choice

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

• A)The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict.
• B)The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict.
• C)The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict.
• D)The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict.

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Definitions:

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service.

Homogeneous Products

Goods that are essentially identical, offered by different sellers within a market.

First-mover Advantage

The competitive advantage gained by the initial ("first-moving") significant occupant of a market segment.

Bertrand Duopoly

A market structure in which two companies compete on price, each setting their price independently with the aim of maximizing profit, assuming the competitor's price is fixed.