Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. You may find it easier to answer the following questions if you fill in the payoff matrix below. 
width="383" />For both Joe and Sam, ________ is a ________.
A. leaving the price at $3; dominant strategy
B. cutting the price to $2.90; dominated strategy
C. leaving the price at $3; Nash equilibrium
D. cutting the price to $2.90; dominant strategy
Answer: D
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If the payment stream of a bond remains the same and the price of the bond goes down, the
A) effective yield is unchanged. B) effective yield rises. C) effective yield decreases. D) bond is reissued to reflect the higher interest rate. E) bond is reissued to reflect the lower interest rate.
When businesses cooperate and agree to hold prices high, it is called ____________, and when they reach a noncooperative equilibrium it is called _______________.
A. collusion; competition B. competition; collusion C. commitment strategy; collusion D. collusion; commitment strategy
Which of the following is true?
a. All types of environmental problems can be solved simply by the enforcement of individual property rights. b. Environmental regulation cannot improve environmental quality. c. Regulation nearly always leads to economically efficient outcomes. d. Government regulation is subject to the same problems caused by lack of information and lack of incentives for economic efficiency that plagued centrally planned economies.
Identify the correct sequence of economic integration starting from the least integrated to the most integrated.
a.free trade area, customs union, economic union, political union, and common market b. free trade area, customs union, common market, economic union, and political union c. common market, free trade area, customs union, economic union, and political union d. free trade area, common market, customs union, economic union, and political union e. common market, free trade area, customs union, political union, and economic union