Game theory is not useful in understanding perfect competition because in a perfectly competitive market:
A. there are too many firms to be able to model their behavior accurately using game theory.
B. no single firm can influence the market price, so firms' decisions are not interdependent.
C. the payoffs to firms' choices are unknown.
D. each firm only cares about its own profit, so there is no interdependence.
Answer: B
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In defining the money supply (M1), economists exclude savings deposits because
a. the purchasing power of savings deposits is much less stable than that of checkable deposits and currency. b. savings deposits are a form of investment and, thus, a better store of value than money. c. savings deposits are liabilities of commercial banks, whereas checkable deposits are assets of the banks. d. savings deposits are not generally used as a means of payment.
What does a market do poorly?
A. Incentivize individuals to efficiently use society’s resources B. Price labor based actually on marginal productivity C. Promote equal income distribution D. Allocate resources to their highest value uses
The European Monetary Union, which preceded the Euro, was
A) opposed by most politicians. B) favored by most economists. C) likely to improve the use of monetary policy to deal with contractionary shocks which strike only one or two countries in Europe. D) all of the above. E) none of the above.
When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods. This is called the _____ effect
a. substitution b. income c. replacement d. augmentation e. disbursement