Describe how if a price-fixing game is repeated over and over, the cooperative outcome might be attained.
What will be an ideal response?
When a game is repeated, it becomes possible for firms to punish cheaters who deviate from an agreement by lowering their profits in future periods of the game. Examples of this are the tit-for-tat strategy and the grim trigger strategy described in the book.
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If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping
a. True b. False
If a shortage exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.
Gresham's Law states
a. supply creates its own demand b. demand creates its own supply c. MV = PQ d. good money drives out bad e. bad money drives out good
Demand-pull inflation:
a. is also called "hyperinflation." b. can be present even during an economic depression. c. is measured differently than cost-push inflation. d. occurs when total spending in the economy is excessive.