The Especial Skills Effect

question 24

Multiple Choice

The especial skills effect:

• A) Is best accounted for by the practice variability hypothesis
• B) Is best accounted for by the practice specificity hypothesis
• C) Cannot be accounted for completely by the practice variability or specificity hypothesis
• D) Is only seen in children

Understand the concept of the kinked-demand curve in explaining pricing behavior and price rigidity in oligopolistic markets.

Recognize the conditions under which collusion might occur in oligopolistic industries and its impact on market outcomes.

Understand the legal implications of cartels and the mechanisms through which firms attempt to maintain collusion.

Understand key events and movements in early 20th-century American history, including World War I and its aftermath.

---

Definitions:

Spillover Cost

A cost incurred by someone who did not choose to incur that cost.

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes the net benefit to society.

Productive Efficiency

Productive efficiency occurs when an economy is operating at its maximum capacity, producing goods and services at the lowest possible cost per unit.

Marginal-Cost-Marginal-Benefit Rule

The marginal-cost-marginal-benefit rule states that optimal decision-making occurs when the marginal cost of an action equals its marginal benefit, ensuring efficient resource allocation.