A Tremendous Flood Along the St

question 53

Multiple Choice

A tremendous flood along the St.Lawrence Seaway destroys thousands of factories,reducing the nation's capital stock by 5%.What happens to current employment and the real wage rate?

• A)Both employment and the real wage rate would increase.
• B)Both employment and the real wage rate would decrease.
• C)Employment would increase and the real wage would decrease.
• D)Employment would decrease and the real wage would increase.

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Definitions:

Collusive Oligopoly

A market situation where a small number of firms agree, explicitly or implicitly, to control prices, market share, or other competitive dimensions, reducing or eliminating competition.

Contestable Market Model

An economic concept that describes a market with free entry and exit, where a company's prices and output levels are constrained by the threat of potential competition.

Price-Leadership Model

A market strategy where a leading firm sets prices that other firms in the industry then follow, influencing the pricing practices across the market.

Cournot Model

An economic model that describes an industry structure in which companies compete on the quantity of output they produce, assuming their rivals' output levels are fixed.