Consider Figure 12.5. If both players confess, then:
A. both players spend 4 years in jail.
B. both players spend 1 year in jail.
C. player A spends 0 years in jail, and player B spends 8 years in jail.
D. player A spends 8 years in jail, and player B spends 0 years in jail.
Answer: A
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Assuming r is the interest rate, to compute the present value of a dollar to be received a year from today, you
A) multiply the dollar by r. B) divide the dollar by (1 - r). C) multiply the dollar by (1 + r). D) divide the dollar by (1 + r).
The highest component of GNP is
A) the current account. B) investment. C) government purchases. D) consumption. E) trade.
Which of the following is NOT correct concerning perfectly competitive firms in the long run?
A. Long-run economic profits are zero. B. Entrepreneurs earn the opportunity cost of their investment. C. The opportunity cost of capital is zero. D. Price equals minimum long-run average cost.
Pie-Oh-My, a monopolistically competitive firm, is baking 80 gourmet pies per day and selling each pie for $25. At that production level ATC is $40, AVC is $30, AFC is $10, and both MR and MC are $16. This firm should
A. increase output to the point where price equals marginal cost. B. continue to produce 80 pies, as price is greater than AFC. C. produce zero pies and pay fixed costs. D. decrease output to the point where marginal cost equals average cost.