In game theory, if two rivals in an oligopoly can avoid a large loss by cutting price from $40 to $35,
a. neither will cut its price
b. one will charge $40 and the other will charge $35
c. their actions will depend on their respective strategies
d. each will cut price but not all the way to $35
e. they will collude to do what's best for both of them
C
You might also like to view...
When set correctly, a Pigouvian tax is efficient because it is equivalent to a lump sum tax.
Answer the following statement true (T) or false (F)
An indirect cost of government debt is:
A. it can distort the credit market and slow economic growth. B. it can cause hyperinflation. C. it can cause unemployment below the natural rate. D. All of these are true.
If a country produces a commodity in the range of decreasing returns to scale, and the country begins to export more in a pure free trade system, the domestic price of the commodity will
a. fall. b. rise. c. exceed the price in foreign countries. d. be below the price in foreign countries. e. One cannot predict the impact on the price of the commodity.
In a certain economy, when income is $1000 . consumer spending is $800 . The value of the multiplier for this economy is 2.5 . It follows that, when income is $1020, consumer spending is
a. $816 . For this economy, an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand. b. $816 . For this economy, an initial increase of $100 in consumer spending translates into a $400 increase in aggregate demand. c. $812 . For this economy, an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand. d. $812 . For this economy, an initial increase of $100 in consumer spending translates into an $800 increase in aggregate demand.