Which of the following is the outcome of the lemons problem in the used-car market?
A) Only low-quality cars will be traded in the market.
B) Only high-quality cars will be traded in the market.
C) Both low-quality and high-quality cars will be traded in the market.
D) No cars will be traded in the market.
Answer: A
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If the Battle of the Sexes game were played sequentially,
A) one of the two pure strategy equilibria would become the only equilibrium. B) the two pure strategy equilibria would alternate in being the equilibrium seen in each round of the game. C) only the mixed strategy equilibrium would exist. D) only the dominant strategy equilibrium would exist. E) the equilibrium would not change.
Which one of the following is an area of agreement among modern macroeconomists with regard to the use of fiscal policy?
What will be an ideal response?
Since 1970, federal expenditures by regulatory agencies have
A) remained constant. B) decreased slightly. C) increased dramatically. D) increased slightly.
A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?
A. Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve. B. Continue selling at the same price, but increase the amount it produces. C. Reduce price, because if it reduces price and demand is inelastic, total revenue will increase. D. Increase price, because if it increases price and demand is inelastic, total revenue will increase.