Suppose two firms are in a game situation, and they each must decide on a strategy regarding whether to select a high price or a low price Profits for a firm are highest when it selects a low price, while the other selects a high price; profits are lowest if one selects a high price, while the other selects a low price; profits are in between when both select low prices; and profits are slightly higher when both select high prices. In the absence of collusion we expect
A) one of the firms to select a high price and the other a low price.
B) one firm to select a high price and the other a low price in the first period, followed by a reversal in the second period.
C) both to select high prices.
D) both to select low prices.
Answer: D) both to select low prices.
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Reducing a tariff will ________ the domestic production of the good and ________ the total domestic consumption of the good
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
The magnitude of the slope of the budget line is equal to the ________ or ________ of the good plotted on the ________ in terms of the other good
A) relative price; marginal cost; y-axis B) relative price; total cost; y-axis C) relative price; opportunity cost; x-axis D) price; opportunity cost; x-axis
If you are following a tit-for-tat strategy in a repeated game, and your opponent makes a cooperative move, you will:
A. collude. B. make a cooperative move in the next round. C. price compete. D. defect.
If the price of inputs rises and foreign income rises:
a. Aggregate demand rises, but aggregate supply does not change. b. Aggregate demand falls, and aggregate supply rises. c. Aggregate demand and aggregate supply fall. d. Neither aggregate demand nor aggregate supply change. e. Aggregate demand rises, and aggregate supply falls.