Describe how if a price-fixing game is repeated over and over, the cooperative outcome might be attained.
What will be an ideal response?
When a game is repeated, it becomes possible for firms to punish cheaters who deviate from an agreement by lowering their profits in future periods of the game. Examples of this are the tit-for-tat strategy and the grim trigger strategy described in the book.
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According to this Application, growth in China and India caused U.S. exports to increase. Because of this increase in U.S. exports, U.S. income will
A) increase by the same amount. B) increase by a larger amount. C) decrease by a larger amount. D) decrease by the same amount.
The average starting salary for a history major is $29,500. If the CPI was 147.5, the real salary is
A) $200.00 an hour. B) $20,000. C) $35,000. D) $43,513. E) $14,750.
A balance of payments crisis is best described as
A) a sharp change in interest rates sparked by a change in expectations about the level of imports. B) a sharp change in foreign reserves sparked by a change in expectations about the future exchange rate. C) a sharp change in interest rates sparked by a change in expectations about the level of exports. D) a sharp change in foreign reserves sparked by a change in expectations about the level of imports. E) a sharp change in foreign reserves sparked by a change in expectations about domestic production.
The optimal strategy in a Vickery auction is to
a. Bid aggressively b. Bid above your value since you would be paying the second highest price c. Bid exactly your value d. Bid below your value