Explain how two Bertrand price competitors can price above marginal cost in an infinitely repeated game setting.
What will be an ideal response?
Let p be any price greater than MC. Then consider the trigger strategy "set p if p has always been set by both firms in previous stages, MC otherwise." Then if firms do not discount the future heavily, the firms are best-responding to each other by playing such a strategy -- making any price above MC a potential equilibrium price.
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Everything else held constant, when output is ________ the natural rate level, wages will begin to ________, increasing short-run aggregate supply
A) above; fall B) above; rise C) below; fall D) below; rise
In a simple macroeconomic model, only one component of expenditures is allowed to change:
A. investment. B. consumption. C. net exports. D. government spending. E. transfer payments.
Refer to the information provided in Figure 26.5 below to answer the question(s) that follow.
Figure 26.5Refer to Figure 26.5. An increase in government spending shifts the ________ to the ________.
A. IS curve; left B. IS curve; right C. Fed rule; right D. Fed rule; left
When tariffs on imported products are removed by a nation, it will result in:
A. Higher prices and lower quantities consumed in that nation B. Higher prices and higher quantities consumed in that nation C. Lower prices and lower quantities consumed in that nation D. Lower prices and higher quantities consumed in that nation