Collusive agreements between two firms are most likely to be honored when the game:
A. is a one-time game with the opportunity for a prisoner's dilemma.
B. has a Nash equilibrium that differs from the outcome that maximizes the payoffs to the two
firms.
C. is a zero-sum game.
D. is repeated and both firms offer credible threats if the other violates the agreement.
Answer: D
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If the marginal propensity to consume (MPC) is 0.90, a $100 increase in investment spending, other things being equal, will cause an increase in equilibrium real GDP of:
a. $90. b. $100. c. $900. d. $1,000.
Competitive markets are characterized by
a. a small number of buyers and sellers. b. unique products. c. the interdependence of firms. d. free entry and exit by firms.
The more firms an oligopoly has,
a. the more likely it is to earn monopoly profits. b. the higher the price of the product. c. the farther the equilibrium quantity will be from the socially efficient quantity. d. the more likely the firms will charge a price close to the perfectly competitive price.
Given the following formula for the Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 1/2(inflation gap) +1/2(output gap) If the inflation rate in the economy were to fall by 2% below the target inflation rate, the target federal funds rate would:
A. Remain at 2.5%. B. Increase by 1.0%. C. Decrease by 3.0%. D. Decrease by 1.0%.