Consider the game tree in Figure 12.8. If Store B's payoff in the second rectangle from the top were $250 instead of $100, the outcome of the game will be that:
A. both stores choose to advertise.
B. both stores choose not to advertise.
C. Store A chooses to advertise but Store B chooses not to advertise.
D. Store B chooses to advertise but Store A chooses not to advertise.
Answer: C
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Which of the following is an implication of the law of diminishing returns?
a. Total output will decline as more workers are hired. b. In the long run, average total cost will eventually decline as output is expanded. c. In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost. d. A doubling of all inputs will lead to more than a doubling of output.
Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy, because higher interest rates will discourage consumption and investment. This argument is known as the:
a. deficit-substitution effect. b. multiplier effect. c. burden-of-debt effect. d. crowding-out effect.
Movements up along a particular short run Phillips curve are not consistent with: a. Increases in aggregate demand
b. Movements up along the short run aggregate supply curve. c. Shifting inflationary expectations. d. Movements up along a particular short run Phillips curve are consistent with all of the above.
Define discrimination. Why does discrimination occur and what evidence exists that it does occur?