Tax increases shift aggregate-demand curve to:
a) right while increases in government spending shift aggregate demand left.
b) right as do increases in government spending.
c) left while increases in government spending shift aggregate demand right.
d) left as do increases in government spending.
Ans: c) left while increases in government spending shift aggregate demand right.
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The ability to control a scarce resource or input is a characteristic of perfect competition.
Answer the following statement true (T) or false (F)
An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will
A) cause the demand for labor to increase, raising wages of both skilled and unskilled labor. B) cause the wage of unskilled labor to rise relative to the price of skilled labor. C) induce the firms in the industry to cut back on all levels—capital, unskilled and skilled labor. D) cause the demand for skilled labor to rise and the demand for unskilled labor to fall.
There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P. Both have no fixed costs and each has a marginal cost of 10 per unit produced. If they behave as profit-maximizing price takers, each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits. If they formed a cartel and split the production of the output evenly, the
profit-maximizing quantity produced by each firm is A) 5. B) 10. C) 15. D) 20.
Answer the following statement(s) true (T) or false (F)
1. The Battle of the Sexes game has two Nash equilibria, neither of which is Pareto optimal. 2. All outcomes in the Copycat Game are Nash equilibria. 3. A solution concept is any way of analyzing a game which leads to the discovery of a Nash equilibrium which solves the game. 4. The concept of Nash Equilibrium is an important solution concept because it helps make predictions. 5. When a game has more than one Nash equilibrium, it is unlikely that a stable equilibrium will ever be reached.