Refer to the normal-form game of price competition in the payoff matrix below.Firm AFirm B??Low PriceHigh Price?Low Price0,050,-10?High Price-10,5020,20Suppose that firm A deviates from a trigger strategy to support a high price. What is the present value of A's payoff from cheating?
A. 50
B. 30
C. 70
D. 20
Answer: A
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According to economic theory, the political process tends to
A) benefit every participant equally. B) harm every participant equally. C) concentrate benefits in the hands of special interest groups and disperse the costs throughout the uninformed voters. D) support public projects that clearly pass a strict benefit-cost analysis.
Adverse selection arises when:
A. the wants of both parties are aligned with one another. B. buyers and sellers have different information about the quality of a good or the riskiness of a situation. C. buyers and sellers with the same information about the quality of a good or the riskiness of a situation seek each other out. D. people behave in a riskier way because they have incomplete information.
The market structure that lies between competition and monopoly.
A. increasing returns to scale. B. intra-industry trade. C. inter-industry trade. D. imperfect competition.
Figure 4-8
Women today are having more babies than women did fifteen years ago. The result is that mothers today have trouble finding baby-sitters and are shocked at what they must pay for child care. Which graph in Figure 4-8 best illustrates how the situation has changed?
a.
1
b.
2
c.
3
d.
4