Bert and Ernie are noncolluding oligopolists. If both choose a high price strategy, each makes $40 in profits; if both choose a low price strategy, each makes $30 in profits. If Bert chooses a high price strategy and Ernie chooses a low price strategy, Bert makes $20 in profits and Ernie makes $60 in profits, while if Bert chooses a low price strategy and Ernie chooses a high price strategy, Bert
makes $60 in profits and Ernie makes $20 in profits. Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?
a. Both choose a high price strategy.
b. Both choose a low price strategy.
c. Bert chooses a high price strategy and Ernie chooses a low price strategy.
d. Bert chooses a low price strategy and Ernie chooses a high price strategy.
b
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The Arrow impossibility theorem explains
A) why government regulation of private markets will always result in a reduction in economic efficiency in these markets. B) why voters are always rationally ignorant. C) why there is no system of voting that will consistently represent the underlying preferences of voters. D) why it is not possible to provide the economically efficient amount of any public good.
In an economic model, an endogenous variable is
A) a stand-in for more complicated variables. B) determined by the model itself. C) determined outside the model. D) a variable that has no effect on the workings of the model.
When consumer surplus is negative, a consumer is willing to pay more than the market price of the good
a. True b. False Indicate whether the statement is true or false
Why might reforms to encourage saving lead to a less egalitarian society?