The National Hockey League locked out the hockey players in an effort to negotiate a salary cap with the players' union. A cap would limit the payroll of each team. League officials acknowledged that the teams have brought the problem on themselves by overspending and overpaying some players in an effort to compete for the best players. Why would the teams have caused this problem for themselves?
A. They tried to create a contestable market and now suffer because there are no barriers to entry.
B. They were caught in the logic of the prisoner's dilemma in which each player maximizing his own self-interest leads to an outcome that is worse off for everyone.
C. They used explicit collusion instead of implicit collusion.
D. They tried to create a cartel and suffered the consequences of too much collusion.
Answer: B
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Menu costs are the costs of:
A. changing prices. B. running a restaurant. C. changing production. D. increasing aggregate demand.
The Consumer Price Index measures
A) the average of raw material prices paid by producing firms. B) the level of prices with respect to goods and services purchased by a typical consumer in urban areas. C) the average of the prices of all goods produced in a country and goods imported from other countries. D) hourly wage rates of manufacturing workers.
The colluding oligopoly will face market demand and produce up until the point at which
A. marginal revenue and marginal cost are equal and price will be set above marginal cost. B. marginal revenue and marginal cost are equal and price will be set below marginal cost. C. price and marginal revenue are equal and price will be set below marginal cost. D. price and marginal cost are equal and price will be set equal to marginal cost.
Why is it true that shortages usually occur mainly when price controls are in effect?
What will be an ideal response?