Suppose two companies own adjacent oil fields. Under the two fields is a common pool of oil worth $60 million. For each well that is drilled, the company that drills the well incurs a cost of $4 million. Each company can drill up to two wells. What is the likely outcome of this game if each company pursues its own self-interest?
a. Each company drills one well and experiences a profit of $26 million.
b. Each company drills one well and experiences a profit of $22 million.
c. Each company drills two wells and experiences a profit of $22 million.
d. One company drills two wells and experiences a profit of $32 million; the other company drills one well and experiences a profit of $16 million.
c
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Which of the following is true in the Stackelberg model?
A) The first firm produces less than its rival. B) The first firm produces more than its rival. C) Both firms produce the same quantity. D) Both firms have a reaction curve.
The Sherman Act
a. prohibited restraint of trade b. created the Federal Trade Commission c. prohibited fraudulent advertising d. regulated the railroads e. exempted insurance companies from antitrust law
Consumer surplus is the
a. amount of a good consumers get without paying anything. b. amount a consumer pays minus the amount the consumer is willing to pay. c. amount a consumer is willing to pay minus the amount the consumer actually pays. d. value of a good to a consumer.
The simple quantity theory of money predicts that if
A) the money supply rises by $200, then GDP falls by $200. B) GDP rises by $400, then the money supply rises by $400. C) the money supply rises by 10 percent, then the price level rises by 10 percent. D) the money supply falls by $300, then GDP rises by $300.