Consider the following output-choice game for two firms:
Firm 2 - low Firm 2 - medium Firm 2 - high
Firm 1 - low 150, 150 100, 160 75, 100
Firm 1 - medium 160, 100 110, 110 50, 75
Firm 1 - high 100, 75 75, 50 0, 0
What is the outcome of the game if both firms use maximin strategies?
A) Both firms choose low output levels.
B) Both firms choose medium output levels.
C) There is no clear outcome under a maximin strategy for both firms.
D) There are two possible maximin outcomes --- Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium.
A
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Which of the following does a social planner necessarily need to know to restore efficiency in a monopoly market?
A) The monopolist's marginal costs only B) The buyers' demand for a close substitute of the product sold in the market C) The monopolist's marginal revenue and the tax levied on the sale of the good D) The monopolist's marginal costs and the buyers' willingness to pay for the good
The president is told that an inflationary gap must be closed but that consumers are increasing their spending on consumption and producers increasing their demand for investment goods. If the gap is to be closed, the President must
a. rely on reducing the price level b. resort to creating a deficit budget c. increase aggregate demand d. rely on increasing the price level e. resort to creating a surplus budget
As a firm expands output, in the short run marginal costs will
a. always decline as output expands. b. increase at first but eventually level off and decline. c. eventually increase as the firm experiences diminishing returns to the fixed factors of production. d. initially increase at a decreasing rate but eventually increase at an increasing rate.
If the U.S. has a comparative advantage in almonds relative to Japan, we would expect that
A. the U.S. would export almonds to Japan and Japan would export almonds to the U.S. B. Japan would export almonds to the United States. C. the U.S. would export almonds to Japan. D. None of these situations would take place.