Refer to the information provided in Table 14.6 below to answer the question that follows.
Table 14.6B's Strategy
?AdvertiseDon't Advertise??A's profit $150 millionA's profit $400 million?AdvertiseB's profit $150 millionB's profit $100 millionA's Strategy????Don'tA's profit $100 millionA's profit $200 million?AdvertiseB's profit $400 millionB's profit $200 millionRefer to Table 14.6. The result of this game is a prisoners' dilemma. In which of the following cases is it most likely that the firms will be able to overcome the prisoners' dilemma?
A. a single interaction
B. government intervention
C. repeated play
D. when both firms follow a maximin strategy
Answer: C
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Suppose the government has a $440 billion budget deficit. If the government borrows $330 billion to finance this deficit and finances the rest by printing money, the amount of new money created will be
A) $90 billion. B) $110 billion. C) $440 billion. D) $770 billion.
Which of the following illustrates the economic inefficiencies of government regulation?
(a) Railroad rate increases are set by a government agency and these increases fall below increases in repair and depreciation costs but railroad passengers are satisfied. (b) Competitive railroad rates are determined by the buying and selling actions of those in the railroad industry. (c) Rate increases set by government agencies are set to match the increases in repair costs and the acceleration in depreciated capital. (d) Government protects private and individual rights to goods, service and resources.
Proponents of the interest-rate-based monetary policy transmission mechanism argue that when the Federal Reserve buys bonds, there will be
A) an increase in investment spending. B) a decrease in the money supply. C) a decrease in nominal Gross Domestic Product (GDP), but not in real income. D) a decrease in the price of outstanding bonds.
The demand curve faced by a perfectly competitive firm
a. is the market demand curve b. slopes downward c. is perfectly elastic d. is vertical e. rises when market supply rises