Every subgame perfect equilibrium is a Nash equilibrium but not every Nash equilibrium is a subgame perfect equilibrium.
Answer the following statement true (T) or false (F)
True
Rationale: Subgame perfect strategies are best responses in each subgame -- regardless of whether the subgame is reached. Since they are best responses to one another, they are Nash equilibrium strategies. But Nash equilibrium allows for strategies that would play non-rationally off the equilibrium path.
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If a $1 increase in price leads to a 3-unit decrease in quantity demanded, then demand must be elastic
a. True b. False
The median-voter theorem would suggest the reason politicians go from extreme to moderate positions on an issue over the course of an election is because they are appealing to the:
A. people in their party and opposing party. B. average voter in their party in the primary, and the average of all voters in the general election. C. median voter in their party in the primary, and the median of all voters in the general election. D. majority of voters in their party in the primary, and the majority of all voters in the general election.
In the long run, under perfect competition:
A) firms earn positive economic profit because of economies of scale. B) firms earn positive accounting profit because of government regulations. C) firms earn zero economic profit because of free entry and exit of firms. D) firms earn negative economic profit because of free entry and exit of firms.
If property rights are not enforced in a country
A) that country will grow more rapidly because of the reduction of law suits. B) that country's growth rate will not be affected. C) entrepreneurs are unlikely to risk their own funds investing in such an economy. D) the market system will still work smoothly.