Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?
What will be an ideal response?
A prisoners' dilemma is a game in which pursuing dominant strategies results in a noncooperative equilibrium that leaves everyone worse off than they would be if they could achieve the cooperative equilibrium. The outcome of noncooperative pricing (competition, in other words) will leave firms worse off than if they cooperated and set higher prices.
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Under a nominal GDP targeting rule, the Federal Reserve
A) changes the interest rate only when real GDP, and hence nominal GDP, is off target. B) cannot use the federal funds rate to conduct monetary policy. C) must publish its expected inflation rate. D) lowers its interest rate when nominal GDP falls below target. E) loses its ability to influence the inflation rate.
If the price of used cars rises, then the CPI will ________ and the GDP deflator will ________
A) increase; increase B) increase; not change C) not change; increase D) not change; not change E) increase; increase by more than the CPI
If a perfectly competitive firm is producing 2,000 units and, at the 2,000th unit, the difference between marginal revenue and marginal cost (MR - MC) is zero, which of the following is true?
A) The firm is maximizing profit. B) The firm should decrease production to maximize profit. C) The firm should increase production to maximize profit. D) The firm should exactly double production to maximize profit.
Diminishing marginal rate of substitution implies that the marginal rate of substitution
A. falls as one move to higher (northeast) in the indifference curve map. B. falls as one travels down (eastward) on an indifference curve. C. rises as one travels down (eastward) on an indifference curve. D. stays the same as one travels down (eastward) on a typical indifference curve.