Give two examples other than oligopoly that show how the prisoners' dilemma helps to explain behavior.
What will be an ideal response?
Answer: The arms race and common resources are some examples of how the prisoners' dilemma helps to explain behavior. In the arms race during the Cold War, the United States and the Soviet Union could not agree on arms reductions because each was fearful that after cooperating for a while, the other country would cheat. When two companies share a common resource, they would be better off sharing it. But, fearful that the other company will use more of the common resource, each company ends up overusing it
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The profit-maximizing employment level for a monopsonist occurs where:
a. wage = MFC. b. wage = MRP. c. price = wage. d. wage = TWC. e. MRP = MFC
For most firms, the major difference between accounting profit and economic profit is that
a. explicit and implicit costs are included in the accounting profit while only explicit costs are included in economic profit. b. accounting profit omits the salaries of managers, and therefore, it is generally greater than economic profit. c. accounting profit is based on opportunity cost, whereas economic profit is based on market transactions. d. accounting profit does not consider the opportunity cost of the firm's equity capital and, therefore, generally overstates economic profit.
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Ceteris paribus, which of the following causes demand to be more elastic with respect to price?
A. Shorter periods of time to adjust to a change in price. B. Fewer substitutes. C. A high ratio of price to income. D. A steeper demand curve for a given price and quantity.