P-TV and QRS-TV are trying to decide whether to air a sitcom or a reality show in a given time slot. Viewers like both sitcoms and reality shows, but sitcoms are more expensive to produce than reality shows since real actors need to be hired. QRS-TV makes its decision first, and then P-TV observes that choice before making its decision. Both stations know all of the information in the decision tree below.
Given the information in this decision tree, if QRS-TV announces that it will air a sitcom, it can expect to:
A. earn $20 million.
B. earn $5 million.
C. lose $5 million.
D. earn $10 million.
Answer: B
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In computing GDP, it is essential to
A) avoid double counting. B) include government transfer payments. C) include government tax revenues. D) count all intermediate products directly as they are produced.
Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:
A. inconsistent reasoning because prices are sunk costs. B. inconsistent reasoning; saving $20 is saving $20. C. rational choice because saving 40 percent is better than saving 4 percent. D. the proper application of the Cost-Benefit Principle.
In a noncooperative pegged situation, when the home country devalues in response to an external shock the:
A) foreign nation will also devalue, endangering the peg. B) home country suffers the entire burden. C) resulting depreciation causes a large shift in demand from the foreign nation to the home country, thereby exporting the recession to the foreign nation. D) nations agree to switch their peg to the U.S. dollar.
The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the outcome will be that the incumbent
A) deters entry. B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway. C) chooses the Stackelberg leader level of output and the potential entrant enters. D) deters entry and earns zero profit.