Table 25.1 Company XYZ's Possible ResponsesCompany ABC's ActionCharge high PricesCharge low PricesCharge high PricesProfit gain/loss=$0Profit loss=$5,000Charge low PricesProfit gain=$50,000Profit loss=$500Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC?
A. $0.
B. -$5,000.
C. $5.
D. -$500.
Answer: C
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Marlene earns a monthly net income of $1,000 for herself and her three school-age children, which puts her family well below the poverty line. Each month she spends $500 on rent, $200 on utilities, and about $150 on school supplies, clothes, shoes, and after-school care for her children. This leaves her with about $250 to spend on nutritionally adequate food for the family each month. Would Marlene qualify for the Supplemental Nutrition Assistance Program (SNAP)?
a. Because Marlene has less than 30% of her income available for a nutritionally adequate diet for her family, she would qualify for SNAP. b. Because Marlene earns a monthly income of $1,000, she is not eligible for SNAP but might be eligible for the Women, Infants, and Children (WIC) program. c. Marlene is not eligible for SNAP, but she is eligible for Temporary Assistance for Needy Families (TANF); this will mean she is caught in the poverty trap. d. While Marlene is not herself eligible for SNAP, her children are eligible for the free breakfast and lunch program at their school, which will provide them with a nutritionally adequate diet.
An increase in demand accompanied by an increase in supply will increase the equilibrium quantity, but the effect on equilibrium price will be indeterminate.
Answer the following statement true (T) or false (F)
The marginal benefit of a taco is measured by
A) the price of the taco. B) the amount of another good a person is willing to give up to get one more taco. C) the amount of another good a person must give up to get one more taco. D) a point on the PPF. E) the opportunity cost of producing another taco.
Ian views playing Wartcraft and drinking soda as perfect complements (one soda with one hour of playing Wartcraft). Currently, sodas are $1 each and Wartcraft costs $1 per hour. Ian has $12 of income
a. Compute Ian's Compensating Variation if the price of Wartcraft rises to $2. b. Compute Ian's Equivalent Variation if the price of Wartcraft rises to $2. c. Compute Ian's change in Consumer Surplus if the price of Wartcraft rises to $2.