The above figure shows the payoffs to two airlines, A and B, of serving a particular route. Is there a Nash equilibrium? What is it? Explain
What will be an ideal response?
Firm A entering and firm B not entering is the Nash equilibrium. Entering is firm A's dominant strategy. It will enter no matter what firm B does. Firm B does not have a dominant strategy but is always better off doing the opposite of firm A. Put in another way, given firm A's decision, if firm B enters, it will incur a loss.
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Given a downward-sloping linear demand curve, if total revenue decreases as quantity of output increases, marginal revenue must be ________.
A. positive and demand is inelastic B. negative and demand is inelastic C. negative and demand is elastic D. positive and demand is elastic
The aggregate supply curve:
A. is explained by the interest rate, real-balances, and foreign purchases effects. B. gets steeper as the economy moves from the top of the curve to the bottom of the curve. C. shows the various amounts of real output that businesses will produce at each price level. D. is downsloping because real purchasing power increases as the price level falls.
A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4. The price of the good is $5. To maximize its profit, this firm should
A) raise its price. B) lower its price. C) increase its output. D) decrease its output. E) increase the price it charges for its product.
If long-term investments are increasing,
a. current consumption must be increasing. b. interest rates must be relatively low. c. interest rates must be relatively high. d. the people must be experiencing a "defective telescopic faculty."