Question

co2

Is the phrase true or false with explanation

3- The opportunity-cost of paying S.R 250 to purchase a Paris St. German T-shirt is the utility/benefit forgone from spending the same amount on other good(s) / service(s). ( ).

4- The "Diminishing Marginal Product Theory" assumes consecutively-added units of the variable factor-input in the short-run, are "homogenous"; that is, the observed phenomenon is "behavior-related” not "inherent”( )

5-Suppose flights by Saudia and Air France on sector: Jeddah-Paris are seen by voyageurs as "substitutes". Furthermore, assume Saudia operates larger pay-load aircrafts; then, the duopoly / dominant firm market model is appropriate to predict potential interdependent pricing strategies ( ).

Answer 1

3. True

Opportunity cost represents the potential benefits that an individual foregoes in order to attain benefit from the chosen good.

4. True

The theory assumes that the units of factors of production in short run are homogeneous. It also assumes that perfect competition entails in the market, perfect competition entails in factors, substitutability of factors exists.

5. True

A duopoly market system is a system under which only 2 firms operate or in a realistic situation, two markets hold the most share in the market and holds control of over 70% of the market share. Any pricing strategy adopted by these two firms will change the whole market situation.  The trends of pricing strategies of these two firms will be interdependent on each other or might even collude to keep the hold over the market.

Thus, the duopoly / dominant firm market model is appropriate to predict potential interdependent pricing strategies.