What is opportunity cost?
What will be an ideal response?
Opportunity cost is the highest-valued alternative given up when selecting an action. For instance, the opportunity cost of studying an hour is whatever the highest-valued alternative would have been for the hour spent studying.
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When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a
a. resource industry. b. exclusive industry. c. government monopoly. d. natural monopoly.
Compounding is:
A. the process of deposits steadily increasing a set amount annually. B. the process of accumulation of additional interest paid on interest that has already been earned. C. the process of adding the percentage of interest times your initial principal yearly. D. None of these statements is true.
Because firms in perfectly competitive markets can sell any quantity without driving down prices, they should:
A. produce as much as possible to maximize profits. B. produce at the lowest cost per unit to maximize profits. C. increase quantity until the additional profit it earns on its last unit sold is zero. D. try to flood the market.
Answer the following statement(s) true (T) or false (F)
1. In the prisoners’ dilemma game, the prisoners can talk to each other about their decision. 2. The firms in an oligopoly often behave like the prisoners in the prisoners’ dilemma. 3. The arms race between the United States and the former Soviet Union is a classic example of the prisoners’ dilemma. 4. The tit-for-tat strategy is commonly used in one-shot games between oligopolists. 5. The snob effect is a positive network externality.