How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
What will be an ideal response?
Explained on page 191.
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According to the monetarists, when the expected rate of inflation rises, the short-run Phillips curve
a. shifts upward. b. shifts downward. c. is unaffected. d. None of the above
Game theory is
A. the study of how people behave in strategic situations. B. the collusion of a few powerful firms to create monopoly power. C. the act of price-fixing to share markets. D. the division of a market into non-competitive areas, creating regional monopolies.
Suppose that it would cost a firm $10 million to develop a new drug. In the absence of a patent, other firms will be able to copy and bring to market a generic equivalent of the drug in three years. In each of these three years, the firm would earn monopoly profits of $3 million. A patent will generate monopoly status for the firm for twenty years. If the government knew this information ahead of time, which of the following is most correct?
A. The government should not grant a patent to the firm, because the firm would earn monopoly profits for three years even without the patent. B. The government should not grant a patent to the firm, because monopoly leads to efficiency losses relative to the competitive market. C. The government should grant a patent to the firm, because even with a patent the firm will not earn a monopoly profits. D. The government should grant a patent to the firm, because the firm would not produce the drug at all without a patent.
In Table 17.3, 
A. the United States has an absolute and comparative advantage in Cars while, Brazil has an absolute and comparative advantage in lumber. B. Brazil has an absolute advantage in both goods but a comparative advantage in lumber only. C. the United States has an absolute and comparative advantage in both goods. D. the United States has an absolute advantage in both goods but a comparative advantage in cars only.