When the Official Price for Goods and Services Is Below

question 35

True/False

When the official price for goods and services is below the equilibrium price in a market, prices no longer perform their rationing function efficiently.

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Definitions:

Price Leadership

An informal method that firms in an oligopoly may employ to set the price of their product: One firm (the leader) is the first to announce a change in price, and the other firms (the followers) soon announce identical or similar changes.

Oligopoly

An oligopoly is a market structure characterized by a small number of firms dominating the market, where each firm has significant control over prices and other market factors.

Collusion

A non-competitive, secret, and often illegal agreement between rivals aiming to disrupt the market's equilibrium by controlling the market price, production, or marketing of goods and services.

Empty Threat

In a sequential game with two players, a noncredible (bluffing) statement made by Player 1 that threatens a penalizing action against Player 2 if Player 2 does something that Player 1 does not want Player 2 to do. Opposite of credible threat.