The threat of punishment in a repeated game tends to:
A. reduce the incentive to break a pricing agreement.
B. anger the other firms, resulting in a price war.
C. maintain prices at the duopoly price level.
D. deter entry.
Answer: A
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Suppose the price elasticity of teenagers' demand for cigarettes is 2.0. If the government imposes a tax on cigarettes that raises the price by 10 percent, by how much will it reduce teenaged smoking?
A) by 5 percent B) by 10 percent C) by 15 percent D) by 20 percent
If leisure is a normal good, then the income effect of a decrease in wage will
A) decrease the number of hours worked. B) increase the number of hours worked. C) decrease the number of leisure hours. D) increase the sum of leisure plus hours worked.
The opportunity cost of holding money is properly measured by the rate of interest on financial assets such as bonds
a. True b. False Indicate whether the statement is true or false
If the marginal propensity to consume (MPC) is 0.75, the value of the spending multiplier is:
a. 0. b. 1. c. 4. d. 5.