Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?
For Robinson Crusoe, engaging in capital investment involves producing tools now that would increase his consumption possibilities in the future. Examples might include making a net for fishing or constructing a tool that enables him to pick fruit faster. By engaging in these activities, he will not be able to use the time to fish and pick fruit for immediate consumption. He sacrifices consumption and gains the ability to consume more fish and more fruit in the future.
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Suppose that, in a sequential game, the first player chooses the strategy with the highest payoff, taking into account an optimal response from the second player. The outcome that results is
a. a Nash equilibrium. b. Pareto optimal. c. a Prisoners' Dilemma. d. a Stackelberg equilibrium.
If a monopolistically competitive firm can earn a profit, it will increase production until:
a. MR > AVC. b. MR = ATC. c. MC > MR. d. MR = AR. e. MR = MC.
Within a game theory model, if a change in decision-making raises firm A's profits by $1 million and lowers firm B's profits by $1 million, the game is a
A. zero-sum game. B. cooperative game. C. positive-sum game. D. negative-sum game.
The Wax Works sells 400 candles at a price of $6 per candle. The Wax Works' total costs for producing 400 candles are $2,500. The Wax Works' economic profit is
A. -$100. B. $0. C. $2,400. D. $2,500.