Does the Invisible Hand Theorem remain true in the Prisoners' Dilemma game? Why or why not? What implication does this result have for cartels?
What will be an ideal response?
No, the Invisible Hand Theorem does not hold in the Prisoners' Dilemma game. If the prisoners behave selfishly, it is individually optimal for them each to confess. This outcome, however, is not Pareto optimal as would be claimed by the Invisible Hand Theorem-both prisoners would be better off (i.e., would receive a lighter sentence) if neither one confessed. The Prisoners' Dilemma game shows that it is difficult for a cartel to maintain shared monopoly profit, because it is individually optimal for each cartel member to cheat on the cartel agreement. Selfish behavior alone cannot be relied on to create an outcome that is good for the entire group-some outside enforcement mechanism (such as government regulation) is needed.
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The short run Phillips curve
A) shows that any inflation rate can co-exist with the natural unemployment rate. B) shows the tradeoff between the inflation rate and the unemployment rate, and it shifts when the expected inflation rate changes. C) shows the relationship between the inflation rate and the expected inflation rate, and it shifts when the natural unemployment rate changes. D) shows the relationship between the inflation rate and the nominal interest rate, and it shifts when the natural unemployment rate changes. E) shows the tradeoff between the inflation rate and the unemployment rate and it shifts when the inflation rate changes.
What is one potential problem with nationalized health care?
A) It might not reduce moral hazard. B) It is guaranteed to solve the principal-agent problem. C) It would be efficient in risk bearing. D) It might cost too much.
In order for something to function as money, it must act as a
What will be an ideal response?
When supply is more elastic than demand, the buyer pays _____ of a tax.
A. all B. most C. half D. less than half