Answer the next question based on the following payoff matrix for two oligopolistic firms in which the numbers indicate the profit in millions of dollars for each firm. Firm A? High PriceLow PriceFirm BHigh priceA = $250A = $325??B = $250B = $200?Low priceA = $200A = $175??B = $325B = $175If the two firms collude to maximize joint profits, there will be
A. no incentive for either firm A or firm B to cheat.
B. an incentive for firm B to cheat and earn more if firm A does not switch strategies.
C. an incentive for firm A to cheat and earn more if firm B does not switch strategies.
D. incentives for both firm A and firm B to cheat.
Answer: A
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In Figure 4-18, there would be a shortage of T-shirts if the price were
A. $10 and the market price will rise. B. $8 and the market will tend toward equilibrium. C. below $8 and the shortage persists. D. between $8 and $6 and the shortage will get larger.
Total output and total income in the circular flow model
A) are measures of the economy's level of savings. B) include only intermediate goods. C) are equal to each other. D) are related because national income is less than national product.
Which of the following is true about perfect competition?
a. Since a perfectly competitive seller can sell all he wants at the market price, her demand curve is horizontal at the market price over the entire range of output that she could possibly produce. b. Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market. c. Perfectly competitive markets have easy entry and exit. d. All of the above are true about perfect competition.
The supply curve for land: a. is almost perfectly elastic
b. is almost perfectly inelastic. c. is downward sloping. d. is horizontal.