This figure displays the choices being made by two coffee shops: Starbucks and Dunkin Donuts. Both companies are trying to decide whether or not to expand in an area. The area can handle only one of them expanding, and whoever expands will cause the other to lose some business. If they both expand, the market will be saturated, and neither company will do well. The payoffs are the additional profits (or losses) they will earn.According to the figure shown, if Starbucks expands in the market, then Dunkin Donuts should:
A. not expand.
B. give an ultimatum.
C. also expand their business.
D. None of these statements is true.
Answer: A
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Banks considered "too big to fail" were:
A. bailed out through fiscal policy. B. bailed out through consumer spending. C. allowed to go bankrupt. D. helped by fiscal policy, but eventually went bankrupt.
Education is heavily subsidized through public schools and government scholarships. This subsidization of education reflects the fact that
a. a negative externality requires a subsidy to move the market equilibrium closer to the social optimum. b. the social cost of education exceeds the private cost of education. c. the social value of education exceeds the private value of education. d. the market-equilibrium quantity of education exceeds the optimal quantity of education.
Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million?
a. It will rise. b. It will fall. c. It will remain unchanged. d. There is not enough information to determine how the index will change.
Which of the following summarizes the limitations of monetary policy?
A. The Fed is most effective at influencing long-term interest rates but is unable to have a short-run impact on the economy. B. The Fed directly sets all interest rates, but no interest rate has any short-run effect on the economy. C. The Fed can directly influence many different interest rates, but it can only influence them a little bit. D. The Fed has a lot of control over just one interest rate, and interest rates influence economic activity in the short run only.