In the prisoner’s dilemma game, each player’s dominant strategy leaves her with a larger payoff than she could receive by cooperating with the other player; however, the “prisoner’s dilemma” is that as a result of noncooperation she cannot chose dominant strategy. Indicate whether the statement is true or false ANSWER FALSE
A change in technology or the relative prices of the inputs used in a production process would cause a manager’s choice of inputs to use in the production process to change as well. Indicate whether the statement is true or false ANSWER TRUE
In an open economy, injections and leakages are related as: A) I + G = S + T. B) I + G + X = S + T + M. C) X + G = T + M. D) none of the above ANSWER B
Consumer debt increases. What is the impact on aggregate expenditures and income? A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases. ANSWER B
The decision by the federal government to prohibit cigarette companies from advertising on television actually caused the companies’ profits to increase, an outcome that is consistent with the prediction of the prisoner’s dilemma game. Indicate whether the statement is true or false ANSWER TRUE
Which of the following is not considered a factor that influences supply? A) Technology. B) Production taxes and subsidies. C) The number of buyers. D) Resource prices. ANSWER C
When demand is unit elastic, an increase in price will cause total revenue to increase, stay the same, or decrease, depending on the corresponding change in quantity demanded. Indicate whether the statement is true or false ANSWER FALSE
If desired spending exceeds output, then firms: A) accumulate their inventories and cut production. B) deplete their inventories and cut production. C) deplete their inventories and increase production. D) accumulate their inventories and increase production. ANSWER C
In the long-run production function, all of the inputs to the production process are allowed to vary. Indicate whether the statement is true or false ANSWER TRUE
Referring to the previous question, all else constant, a one unit increase in the price of good Y would cause the quantity demanded of good X to: A) decrease by 2 units. B) increase by 2 units. C) decrease by 1 unit. D) decrease by 5 units. ANSWER A
