Why would a firm in balanced oligopoly choose a tit-for-tat strategy?
A firm appreciates that the most attractive outcome (charging low prices while the rival charges high prices, thereby capturing the entire market) is impossible because the rival will immediately react by lowering its own price. The best strategy is for both firms to charge high prices. But how can a firm achieve that outcome? By playing a tit-for-tat strategy, charging a high price and announcing that it will follow whatever price its rival chooses. In this way, the rival has no incentive to cut price.
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The free rider problem causes goods not to be produced when
A) the opportunity cost of providing them is low. B) the quantity supplied is greater than the quantity demanded. C) they can't be produced by government. D) they can't be provided exclusively to the people who pay for them.
In the Keynesian model, if interest rates fall below what people consider normal, households will respond by
A) decreasing the saving rate. B) reducing the saving rate. C) holding more money. D) holding more bonds.
The second-order condition for a monopoly maximizing its profit is:
A. (dMR/dQ) < (dMC/dQ). B. (d2R(Q)/dQ2) ? (d2C(Q)/dQ2) < 0. C. (d2R(Q)/dQ2) ? (d2C(Q)/dQ2) < 0 or (dMR/dQ) < (dMC/dQ). D. (d2R(Q)/dQ2) ? (d2C(Q)/dQ2) = 0.
If the euro/U.S.dollar exchange rate is 1.1€/U.S. $ in New York but 1.05€/U.S. $ in London, we should see:
A. people selling euros and buying dollars in New York and then buying euros by selling dollars in London. B. the dollar should appreciate in New York relative to the euro. C. people selling U.S. dollars and buying euros in New York and then selling those euros and buying $'s in London. D. the price differential between the markets increase as people seek to take advantage of the situation.