Suppose market demand is p = 10 - Q. Firms incur no cost of production. If firm A is the incumbent, can it deter the entry of its rival, firm B?
What will be an ideal response?
Firm B's reaction function is qB = 5 - (1/2)qA. Knowing this, firm A's profit function is ? = 5qA - q2A/2. The Stackelberg leader maximizes profit at a quantity of 5 and firm B will produce 2.5. Firm A's profit is 12.5. If firm A produces more, firm B will still enter and earn a profit. Firm B must earn a profit since it faces no costs. Firm A's profit falls as its output increases. So, firm A cannot deter entry and is better off accommodating firm B.
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The LM curve shows a series of income-interest rate combinations at which there is equilibrium in the
A) bond market. B) goods market. C) saving-investment market. D) money market.
Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?
a. The exchange rate for X's currency is 9. b. The exchange rate for X's currency is more than 9. c. The exchange rate for X's currency is 3. d. The exchange rate for X's currency is 0.11. e. Knowing one exchange rate does not mean we can tell the other exchange rate.
A command-and-control policy is another term for a
a. pollution permit. b. government regulation. c. corrective tax. d. Both a and b are correct.
A research project is conducted by offering a randomly selected 75 of the 200 local dog owners a chance to have their dogs wear a new flea collar for three months to see if the collar reduces the incidence of fleas. 50 of the 75 randomly selected dog owners agree to the offer, and 25 of those drop out of the study before the end of the three months. Using the intention to treat method, the results from how many of the dogs that were not selected to be a part of the project should be included in the research project?
A. 0 B. 125 C. 150 D. 200