What is game theory and what light does it shed on the issues faced by duopolists?
What will be an ideal response?
Game theory is a tool economists use to analyze the behavior of oligopolistic firms because game theory is a tool to study strategic behavior. Game theory shows that because these firms are interdependent, the decisions they make to promote their own self-interest can wind up harming all the firms. The dilemma faced by duopolists is illustrated using game theory: Firms looking to earn for themselves the maximum possible profit can wind up earning less profit than if they had behaved less self-interestedly and more cooperatively.
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There is excess production of tomatoes in the market. This implies that
A. the current price is above the equilibrium level. B. supply of tomatoes is more than the demand. C. quantity demanded is more than quantity supplied. D. the price will be rising, as a result.
Predatory pricing: a. occurs when a firm increases price in order to exploit inelastic demand by consumers
b. occurs when a firm prices below average variable cost in order to drive competitors out of the market. c. is difficult to distinguish from vigorous competition in practice. d. is characterized by both (b) and (c).
If the Fed's monetary policy causes a substantial increase in interest rates, what is the most likely impact on velocity?
a. It will decrease. b. It will increase. c. It will remain constant. d. Velocity is unrelated to interest rates.
Differences in human capital among workers can often be attributed to social or political processes rather than economic processes
a. True b. False Indicate whether the statement is true or false