In the First Half of 2008, Food and Energy Costs

question 11

Multiple Choice

In the first half of 2008, food and energy costs in the United States increased. At the same time, the financial crisis slowed production. As a result, economists warned that the economy would

• A) suffer an inflationary gap.
• B) see a decrease in aggregate demand and an increase in long-run aggregate supply.
• C) experience stagflation.
• D) see an increase in potential GDP.

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Definitions:

Oligopolies

A market structure characterized by a small number of large firms that dominate the market, often leading to limited competition and higher prices.

Collusion

An agreement, often illegal, between firms to limit competition by fixing prices, dividing markets, or coordinating production.

Concentration Ratio

A measure of the total output produced in an industry by a given number of firms, usually the largest in the industry, indicating the degree of market concentration.

Herfindahl-Hirschman Index

A measure used to calculate the level of competition within an industry, represented by the sum of the squares of the market shares of all firms in the industry.