Answer the following questions true (T) or false (F)
1. A prisoner's dilemma leads to a noncooperative equilibrium.
2. A member of a cartel earns more profits by producing more than its quota and selling at a price higher than the cartel's price.
3. Collusion is common in oligopoly and monopolistically competitive industries.
1. TRUE
2. FALSE
3. FALSE
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Explain the process by which a private subsidy corrects an external benefit
What will be an ideal response?
Sellers are sure the demand for their product is relatively inelastic at the price currently being charged
A) could increase their net revenue by raising the price. B) could increase their total revenue by lowering the price. C) would decrease their net revenue if they raised the price. D) would decrease their total revenue if they raised the price.
The above figure shows the demand and supply curves for housing. What would be the effects of a rent ceiling equal to $500 per month?
A) a surplus equal to 3,000 apartments B) a shortage equal to 3,000 apartments C) a shortage equal to 250 apartments D) nothing because the rent ceiling has no effect on the equilibrium price and quantity
If market price is greater than the minimum of AVC but below the minimum of AC, then
A) the firm will shut down. B) revenue covers variable costs and some of the fixed costs and profit is positive. C) revenue covers variable costs and some of the fixed costs, although profit is negative. D) economic profit is zero.