Assume Belgium can produce 5 units of good X or 2 units of good Y. Germany can produce 4 units of good X or 3 units of good Y. What would be the terms of trade between Belgium and Germany for 1 unit of good Y?
A. Between 4/3 and 5/2 units of X.
B. Between 4/3 and 5 units of X.
C. Between 4 and 5 units of X.
D. Between 5/2 and 4 units of X.
Answer: A
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A prisoner's dilemma is a game in which:
A. the players' payoffs are smaller when both play their dominant strategy compared to when both play a dominated strategy. B. neither player has a dominant strategy. C. the players' payoffs are larger when both play their dominant strategy compared to when both play a dominated strategy. D. one player has a dominant strategy and the other does not.
Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of market failure is involved?
A. Market power. B. Public goods. C. Externalities. D. Inequity.
A perfectly competitive firm is a price taker because
A. It has market power. B. Its products are differentiated. C. Market supply is upward-sloping. D. The price of the product is determined by many buyers and sellers.
Which of the following is the best example of a market failure that would lead a firm to extract resources at a rate that is faster than the rate that would maximize its long-term stream of profits?
A. The market price of the resource rises. B. Weak property rights create fears that firms will not be allowed to extract in the future. C. An increase in market interest rates. D. New information suggests that the demand for the resource will be greater in the future.