For a commitment strategy to work:
A. the punishment must occur immediately after the game is played.
B. the punishment must be so bad that it outweighs the incentive to defect in the game.
C. no player may have a dominant strategy.
D. both players must agree to a punishment.
Answer: B
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In 2011, total output of goods and services in the United States was approximately
a. $10 trillion. b. $12 trillion. c. $15 trillion. d. $20 trillion.
Which of the following is a good example of efficient specialization and voluntary exchange?
a. A college professor hires someone to rototill a garden for spring planting. b. A college professor works on the engine of a car for a neighbor who is a mechanic. c. A lawyer decides to babysit his young child and agrees to do so for others for cash. d. A physician agrees to help a neighbor work on her income tax return in exchange for her bookkeeping services.
Suppose that deposit insurance were reduced to a maximum of $50,000 per account (instead of $250,000). This would address the specific market imperfection of
a. externalities. b. imperfect information. c. rent seeking. d. moral hazard.
A developing economy is considering restricting the amount of money its citizens can invest abroad. What might the purpose of this restriction be?
A. to increase the degree of equality in the income distribution B. to increase capital formation by forcing its citizens to invest in their own country C. to reduce the nation's trade deficit so that interest rates will be reduced and capital formation will increase D. to increase the dependency of the economy on developed economics