Lee and Cody are playing a game in which Lee has the first move at A in the decision tree shown below. Once Lee has chosen either aggression or cooperation, Cody, who can see what Lee has chosen, must choose either aggression or cooperation at B or C. Both players know the payoffs at the end of each branch. 
Suppose Cody tells Lee that if Lee chooses aggression, then Cody will also choose aggression, and if Lee chooses cooperation, then Cody will also choose cooperation. Cody's statement is:
A. not credible.
B. a description of the two equilibria in this game.
C. a commitment device.
D. credible.
Answer: A
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A. increase; increase B. decrease; increase C. increase; decrease D. decrease; not change
Competition is
What will be an ideal response?
A production possibility graph slopes down because of:
A. the law of increasing costs. B. scarcity. C. inefficiency. D. unemployment.
Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is a competitive price taker?
A. Marginal revenue and market price are equal for the competitive price taker but not for the monopolist. B. The monopolist does not always produce the output that equates marginal cost and marginal revenue; the competitive price taker does. C. The monopolist charges the highest price possible; the competitive price taker charges a price equal to its per-unit cost. D. A monopolist can earn economic profit in the short run; a competitive price taker cannot.