What happens in a duopoly if both firms try to act as the Stackelberg leader?
What will be an ideal response?
If both firms think they are the leader, they will maximize profits subject to the other firm's response function. Each firm will produce twice what the other firm thinks it is producing. As a result, output and price are driven to the competitive equilibrium.
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A contractionary monetary policy raises the real interest rate, causing the domestic currency to ________, thereby ________ net exports
A) appreciate; raising B) appreciate; lowering C) depreciate; raising D) depreciate; lowering
The problem of moral hazard arises because _____
a. individuals receive insurance through their employer, who has different incentives b. individuals with insurance have no incentive to avoid insured expenditures c. some individuals have religious objections to purchasing insurance d. some individuals are immoral
If you were the Chairman of the Fed and faced inflation, you would most likely
a. encourage commercial banks to provide loans by buying government securities b. encourage commercial banks to provide loans by raising the discount rate c. encourage commercial banks to provide loans by selling government securities d. restrict commercial bank lending by selling government securities e. restrict commercial bank lending by lowering the federal funds rate
Which of the following plays an increasingly important role in the U.S. economy?
A.) International trade. B.) Manufacturing. C.) Farming. D.) Construction and mining.