Exhibit 10-6 Two-Firm Payoff Matrix
Assume costs are identical for the two firms in Exhibit 10-6. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:
A. Widget Co. charging the low price and Ajax Co. charging the high price.
B. Widget Co. charging the high price and Ajax Co. charging the low price.
C. Widget Co. charging the low price and Ajax Co. charging the low price.
D. Widget Co. charging the high price and Ajax Co. charging the high price.
Answer: D
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As a result of low interest rates on CDs and the perceived riskiness of alternative investments following the financial crisis of 2007-2009, the bond market was affected in all of the following ways EXCEPT:
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A decrease in supply will cause a(n)
a. increase in demand b. decrease in demand c. increase in quantity demanded d. decrease in quantity demanded e. decrease in equilibrium price
Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?
A. People are irrational, are prone to systematic errors, have stable preferences, and care about fairness. B. People are rational, adjust for errors, have stable preferences, and easily resist temptation. C. People care deeply about fairness, eagerly and accurately calculate ways to help others, assess future and present options equally well, and resist temptations in their selflessness. D. People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior.