ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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imperfect competition comes is the result of optimizing behavior by individuals.
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perfect competition is assumed with respect to the product market
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a natural monopoly is presumed for the product market.
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both a and c
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Detailed explanation-1: -In particular, New Keynesians assume that there is imperfect competition in price and wage setting to help explain why prices and wages can become “sticky", which means they do not adjust instantaneously to changes in economic conditions.
Detailed explanation-2: -In the new Keynesian model, the firms generally produce less than what is optimal because of the deadweight losses associated with imperfect competition. This is important because it means the economy produces less than the socially optimal amount, even in the long 72 Page 7 run.
Detailed explanation-3: -New Keynesian advocates maintain that prices and wages are “sticky, ” meaning they adjust more slowly to short-term economic fluctuations. This, in turn, explains such economic factors as involuntary unemployment and the impact of federal monetary policies.
Detailed explanation-4: -oligopoly model is the most popular model of imperfect competition. It is a model in which the number of firms matters, and it represents one way of thinking about what happens when the world is neither perfectly competitive nor a monopoly.