The prisoner's dilemma is a well-known game in which:
A. players always cheat.
B. noncooperation between prisoners is not the best joint action but is the best independent action.
C. players never cheat.
D. cooperation between prisoners is always the best independent action.
Answer: B
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During an economic downturn, Keynes argued that businesses would:
A. not increase spending because of the sharp rise in interest rates. B. not increase spending even if interest rates fell all the way to zero. C. increase spending because interest rates would fall to zero. D. increase spending because of the sharp rise in interest rates.
Assume that there is a 25% reserve requirement and that the Federal Reserve buys $200 million worth of government securities. If the securities are purchased from the public, then this action has the potential to increase bank lending by a maximum of ________.
A. $800 million, and also by $800 million if the securities are purchased directly from commercial banks B. $600 million, and also by $600 million if the securities are purchased directly from commercial banks C. $800 million, but only by $600 million if the securities are purchased directly from commercial banks D. $600 million, but by $800 million if the securities are purchased directly from commercial banks
Which of the following statements is correct?
a. Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost. b. Corrective taxes distort economic incentives. c. Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate. d. Both a and b are correct.
For a given real interest rate, an increase in inflation makes the after-tax real interest rate
a. decrease, which encourages savings. b. decrease, which discourages savings. c. increase, which encourages savings. d. increase, which discourages savings.