The application of game theory to economics allows us to understand firm behavior in some forms of oligopoly. Game theory suggests that in a two-firm industry, each firm will
a. avoid pricing high when the other prices low
b. select high prices and defend that selection because, in the long run, their profits are higher than if they competed by lowering prices
c. end up mistaking the other's intentions, which results in low prices and low profit for both in the long run
d. end up colluding with the other to form a cartel
e. agree with the other not to allow other firms to enter the industry
A
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The long-run real interest rate is the long-run nominal interest rate ________
A) minus inflation expectations B) plus all taxes C) plus inflation expectations D) minus all taxes
The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar ________ against the Euro and ________ against the Japanese yen
A) depreciated; depreciated B) appreciated; appreciated C) appreciated; depreciated D) depreciated; appreciated
If demand price elasticity measures 2, this implies that consumers would:
a. buy twice as much of the product if the price drops 10 percent. b. require a 2 percent drop in price to increase their purchases by 1 percent. c. buy 2 percent more of the product in response to a 1 percent drop in price. d. require at least a $2 increase in price before showing any response to the price increase. e. buy twice as much of the product if the price drops 1 percent.
In Exhibit 11-5, at what wage rate will the firms stop hiring these workers?
A. $25.00. B. $20.00. C. $15.00. D. $10.00.