5 Questions
In the kinked demand curve model of oligopoly, it is assumed that:
Response to a price increase is less than the response to a price decrease
The Cobb-Douglas homogeneous production function Q = $L^{1/2}K^{1/2}$ exhibits:
Constant returns to scale
Price discrimination will be profitable only if the elasticity of demand in different markets is:
Different
An example of positive economic analysis would be:
An analysis of the relationship between the price of food and quantity purchased
Business cycles emerge in which type of economic system?
Mixed economic system
Study Notes
Oligopoly Models
- In the kinked demand curve model of oligopoly, it is assumed that the demand curve has a kink at the current price level, with a more elastic segment above the kink and a less elastic segment below.
Production Function
- The Cobb-Douglas homogeneous production function is Q = $L^{1/2}K^{1/2}$, where Q is output, L is labor, and K is capital.
Price Discrimination
- Price discrimination will be profitable only if the elasticity of demand in different markets is different, allowing a firm to charge different prices in each market.
Economic Analysis
- An example of positive economic analysis would be a study that aims to describe and explain an economic phenomenon without making value judgments.
Economic Systems
- Business cycles emerge in capitalist economic systems, characterized by private ownership of the means of production and creation of goods and services for profit.
Test your knowledge of business economics with this mock test paper. Answer questions on topics like price discrimination and economic analysis.
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