Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $2 million, but firm B only makes $2 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $4 million. If firm A stays out, it earns zero while firm B earns $8 million. Which of the following are Nash equilibrium strategies?
A. (enter, soft) and (not enter, soft)
B. (enter, hard) and (not enter, soft)
C. (not enter, hard) and (enter, soft)
D. (enter, hard) and (not enter, hard)
Answer: C
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Joe's Taco Hut can purchase a delivery truck for $20,000 and Joe estimates it will generate a net income (after taxes, maintenance and operating costs) of $2,000 per year. He has no other opportunities. He should:
A. purchase the truck if the real interest rate is greater than 10%. B. not purchase the truck if the real interest rate is greater than 2%. C. purchase the truck only if the real interest rate is less than 2%. D. purchase the truck if the real interest rate is less than 10%.
Which statement is true?
A. William Julius Wilson and Charles Murray are basically in agreement about the causes of the formation of a permanent underclass. B. The permanent underclass has more white members than black members. C. There is very little evidence to show that there is actually a permanent underclass. D. There are more poor whites than poor blacks in the United States.
Suppose the sweater manufacturing technology enables sweater makers to experience constant returns to scale over the range between 4,000 and 10,000 . If their long-run average total cost curve is U-shaped, what must be true? a. Long-run average costs will be lowest when the firm produces as many sweaters as possible
b. The total cost of producing 10,000 sweaters is more than the total cost of producing 11,000. c. The total cost of producing 2,000 sweaters is half the total cost of producing 4,000. d. The ATC of producing 3,000 sweaters is the same as the ATC of producing 11,000. e. Producing fewer than 4,000 or more than 10,000 sweaters is not efficient.
The inputs used to produce goods and services are called
a. profit factors. b. marginal products. c. labor demands. d. factors of production.