If Airfares to Europe Were to Increase,an Economist Would Predict

question 144

Multiple Choice

If airfares to Europe were to increase,an economist would predict that:

• A) most people will not change their travel and vacation plans.
• B) more individuals will choose to fly to Europe because now it is a more valuable experience.
• C) some individuals will substitute toward other travel destinations.
• D) airlines will make significantly greater profits.

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Definitions:

Cournot Model

A model of oligopoly in which firms choose their output levels simultaneously, assuming the output of the rivals as given, to maximize their own profit.

Collude

To come to a secret understanding for a harmful purpose; conspiracy between firms to fix prices or otherwise restrict competition.

Tacit Collusion

A situation where firms in a market understand each other's behaviors and outcomes without direct communication, leading to a form of non-competitive equilibrium.

Antitrust Laws

Legislation enacted to prevent new monopolies from forming and police those that already exist to protect consumers and ensure fair competition in the marketplace.