When there’s uncertainty as to the length of a game A) cooperation still does not occur, because cooperation unravels at the beginning of the game. B) cooperation can potentially occur if trigger strategies are adopted. C) firms will cooperate because they treat the game as one that is infinitely repeated. D) firms will randomly pick […]
If government imposes a price ceiling on a good that is below the market equilibrium price A) a surplus will develop. B) a shortage will develop. C) producers will reduce their sales price. D) consumers will reduce their demand for the good. ANSWER B
If a government policy change harms a monopolist, the government could A) tax those who get additional gains and compensate the monopolist, thereby making the change a Pareto improvement. B) increase the general tax rate and compensate the monopolist, thereby making the change a Pareto improvement. C) do nothing, because the change is a Pareto […]
If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE? A) It will shut down in the short run and wait until the price increases sufficiently. B) It will exit the industry in the long run. C) It will operate […]
Government expenditures on housing subsidies at all levels total more than $45 billion a year. a. True b. False ANSWER a
Suppose that a perfectly competitive industry is in long-run equilibrium, and demand increases. Explain the short- and long-run effects on the firm and the industry. What will be an ideal response? ANSWER Short run: An increase in demand raises equilibrium price and quantity. Existing firms produce more (because the higher price means that MR=MC […]
Suppose you have $400,000 saved up and purchase a medium-sized house for $200,000. Consider the following 2 scenarios: i. The very next day, the prices of all houses, including the one you have just bought, double. ii. The very next day, the prices of all houses, including the one you bought, fall by half. Show […]
If Pareto efficiency has been achieved A) there are no additional Pareto improvements that can be made. B) surplus is maximized. C) economic efficiency is also achieved. D) All of the above. ANSWER D
Which of the following is a sequential game? A) rock-paper-scissors (Roshambo) B) paintball C) Monopoly D) boxing ANSWER C
In deciding whether to operate in the short run, the firm must consider the relationship between price and A) total cost. B) average variable cost. C) total fixed cost. D) the number of buyers. ANSWER B
