Economists Need Different Models of the Economy Because

question 155

Multiple Choice

Economists need different models of the economy because

• A) the economy behaves differently depending on how much time has passed after a demand shock.
• B) we need a different model to analyze a positive demand shock than we need to analyze a negative demand shock.
• C) the way economic performance is measured changes over time.
• D) prices tend to be less flexible over time.

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Definitions:

International Cartel

An agreement among companies from different countries aimed at controlling production, fixing prices, or limiting competition in the international market.

Collusion

An agreement, usually secretive, between firms to fix prices, limit supply, or divide markets to reduce competition and increase profits.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making at least one individual worse off, maximizing total social welfare.

Oligopolistic Firms

Companies operating in a market structure characterized by a small number of entities dominating the industry, often resulting in limited competition.