Repeated market interaction, particularly when there is no end to the interaction in sight, can
A. not change the dominant strategic equilibrium.
B. only change the equilibrium if the first mover changes.
C. result in a mixed, secure strategy.
D. change the dominant strategic equilibrium.
Answer: D
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In which of the following tax systems do taxes increase as income increases?
a. both proportional and progressive b. proportional but not progressive c. progressive but not proportional d. neither proportional nor progressive
The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment. He argues that if the Fed increased the money supply faster, more workers would find jobs. The Senator's argument
a. is completely correct. b. is completely wrong. c. is true for the short run but not the long run. d. is true for the long run but not the short run.
Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?
A. A price war will break out, and all of the kids will lower their prices. B. Each kid will keep his or her price at the original amount. C. Eventually prices will equalize across all three lemonade stands. D. Everyone will start to charge 50 cents to maximize revenue.
Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $40, then searching for another apartment is a gamble with an expected value of:
A. $20. B. $0. C. -$10. D. $10.