Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC abide by the agreement, then OPEC's profit will be $200 million and Mexico's profit will be $100 million. If both Mexico and OPEC cheat on the agreement, then OPEC's profit will be $175 million and Mexico's profit will be $80 million. If only OPEC cheats, then OPEC's profit will be $185 million, and Mexico's profit will be $60 million. If only Mexico cheats, then Mexico's profit will be $110 million, and OPEC's profit will be $150 million.To Mexico, the payoff to cheating is either:
A. $150 million or $200 million.
B. $100 million or $110 million.
C. $60 million or $100 million.
D. $80 million or $110 million.
Answer: D
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Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum average total cost?
a. homogeneous products. b. few sellers. c. firms face downward-sloping demand curves. d. free entry and exit.
Several producers in industry A developed an improved technology that reduces the quantity of resources used to produce a given output. Which of the following would be expected?
a. The per-unit costs of production of the firms adopting the technology would increase. b. In the short run, economic profits would be earned by the earliest firms adopting the technology. c. Product price would immediately fall to the minimum average total cost of the firms quickly adopting the technology, thus retarding the rate at which firms enter the industry. d. Producers who adopt the technology will have short-run economic losses.
If you left $2,500 on deposit with a bank promising to pay you a 5 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:
A. $2,625 B. $28,668 C. $11,467 D. $328,750
By consumer sovereignty we mean that:
A. all goods and services are produced by consumers. B. consumers determine what goods and services are produced. C. businesses decide what the consumer will buy. D. government is responsible for protecting consumer interests.