The avoidance of a worst case scenario strategy in a two-firm balanced oligopoly can best be described as a strategy
a. taken by the more powerful of the two firms, the other follows to avoid a worst case outcome
b. taken by the less powerful of the two firms in order to avoid a worst case outcome
c. that is best for the firm regardless of the strategy taken by its rival
d. that avoids a Nash equilibrium outcome
e. that allows both firms to obtain cartel-like profits
C
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A executive can either slack (effort e = 0) or work hard (e = 1) on behalf of shareholders. If she slacks, the firm earns a gross return of 1,000 for sure. If she works hard, there is an even chance of the gross return being 10,000 or 80,000 . Her overall utility equals her utility from wage income (of the form w1/2, where w is the wage) minus the disutility of work (simply d), or in other words
U = w1/2 – d. If she slacks, she experiences no disutility of work (d = 0) but if she works hard, the disutility of work is d = 50 . Assume that U = 0 in her next best available job. What is the optimal wage contract that shareholders would offer if they can observe the effort of the executive? a. A flat wage w = 0 and no requirement to work hard. b. A flat wage w = 50 and a requirement to work hard. c. A flat wage w = 2,500 and a requirement to work hard. d. A share of 50% of the profits and a requirement to work hard.
The destruction of manufacturing jobs and workers leaving their jobs to find better ones both contribute to structural unemployment
a. True b. False Indicate whether the statement is true or false
In long-run perfectly competitive equilibrium, which of the following is false?
A) There is efficient, low-cost production at the minimum efficient scale. B) Economic surplus is maximized. C) Firms earn economic profit. D) Economies of scale are exhausted.
If the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen, then, ceteris paribus, the price of American goods in Japan
A. will remain the same. B. will decrease. C. will increase. D. could either increase or decrease.