Refer to the graph shown. Assuming that the monopoly maximizes profit, the social cost of monopoly will be:
A. $40,000 per day.
B. $20,000 per day.
C. $10,000 per day.
D. zero.
Answer: B
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Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch.
The equilibrium to the game results in ________ for Amy and Tracy relative to what they could get if they could solve their ________.
A. lower payoffs; commitment problem B. lower payoffs; prisoner's dilemma C. higher payoffs; commitment problem D. lower payoffs; credible threat
Refer to the diagram. Assume the economy is initially at point b 1 . With a time lag between price and nominal wage adjustments, an increase in aggregate demand will temporarily move the economy from:
A. b 2 to b 1 .
B. c 1 to b 2 .
C. b 1 to c 1 .
D. b 1 to b 2 .
Transfer payments are money received as grants from government.
Answer the following statement true (T) or false (F)
Suppose a new oxygen-enrichment process will cut in half the energy required to smelt copper. The firm selling licenses for this patented process will experience a greater demand for its product when
a. the price of copper falls and smelters become more desperate to economize. b. energy prices are expected to fall. c. energy prices are expected to rise. d. the price of steel, a substitute for copper, declines.