Tutor profile: Rahees K.
Predatory pricing policy is designed to:
Answer: Drive competitors out of business If predatory pricing occurs, the dominant firms will charge low prices for a long time, so competitors drive out from the market, and other firms will enter the market, raising the price to recoup its losses. If the dominant firms have greater diversification of products and markets and greater financial resources, they can engage in predatory pricing.
In the relative income hypothesis, the consumption is related to: A. Peak Past consumptions B. Median current consumption of peer group C. Both A and B D. None of the above
Answer--C James Duesenberry develops the relative income hypothesis. He mentioned that two types of relative income affect consumption: Current income relative to the past peak income Own income relative to the average income of the neighbor. Hence, Option A and B are correct
Suppose the consumer is in equilibrium, MRSxy is 2.5. If the price of commodity Y is $16, then what will be the price of commodity Y?
We know that the consumer is in equilibrium where, MRSxy = Px/ Py From the question, MRSxy=2.5 and price of commodity Y is 16, then 2.5=Px/16 Px=16 * 2.5 =40 Hence, the price of commodity Y is $40
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