Which of the following statements is false?
A) The exchange equation assumes that velocity is constant.
B) Velocity is the average number of times a dollar is spent to buy final goods and services in a year.
C) The simple quantity theory of money predicts that changes in the money supply lead to strictly proportional changes in the price level.
D) In the simple quantity theory of money the aggregate supply curve is vertical.
A
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Consider the game depicted below. Player 1 decides between going L or R in stage 1 and 3 of the game. Player 2 decides between going l and r in stage 2 of the game.
a. List the possible pure strategies for each player in this game and illustrate the payoffs from each pair of strategies in a matrix.
b. Is there a dominant strategy for either player?
c. Identify the subgame perfect equilibrium strategies and outcome. d. Identify the Nash Equilibria that are not subgame perfect. e. For each Nash Equilibrium that is not subgame perfect, explain which parts of the Nash Equilibrium strategies are non-credible. f. Suppose you have developed a drug that can be administered without the victim being aware of it. The effect of the drug is that the victim suddenly becomes gullible and believes anything he is told. You only have 1 dose of the drug and decide to auction it off to the two players right before they play each other in the game you have analyzed so far. Each player is asked to submit a sealed bid, and the highest bidder will be sold the drug at a price equal to the highest bid. In case of a tie in bids, a coin is flipped to determine who wins and pays the price that was bid. Suppose in this part that payoffs are in terms of dollars and that bids can be made in one cent increments. Suppose further that players do not consider bidding above the maximum they are willing to pay. Given that the players know each other's payoffs in the above game, what is the equilibrium price that you will be able to sell the drug for? (Hint: There are two possible answers.) g. In part (f), we said "Suppose further that players do not consider bidding above the maximum they are willing to pay." Can you think of a Nash equilibrium to the auction that would end in a price of $8 if we had not made that statement in (f)? What will be an ideal response?
If two resources, such as labor and farm machinery, are complementary,
a. one can be used in place of the other b. an increase in the price of one will increase the demand for the other c. an increase in the price of one will increase the supply of the other d. a decrease in the price of one will increase the productivity of the other, which will decrease the demand for that other resource e. a decrease in the price of one will increase the demand for the other
Human capital is:
A. the factories and machinery made by workers. B. the talents, training, and education of workers. C. the factories and machinery used by humans in the production process. D. the financial resources available to humans for investment.
In which case will the government collect more tax revenue?
A. 5% tax rate and $200,000 average income B. 10% tax rate and $120,000 average income C. 50% tax rate and $50,000 average income D. 70% tax rate and $20,000 average income