Consider the following output-choice game for two firms:
Firm 2 - low Firm 2 - medium Firm 2 - high
Firm 1 - low 150, 150 100, 160 75, 100
Firm 1 - medium 160, 100 110, 110 50, 75
Firm 1 - high 100, 75 75, 50 0, 0
What is the outcome of the game if both firms use maximin strategies?
A) Both firms choose low output levels.
B) Both firms choose medium output levels.
C) There is no clear outcome under a maximin strategy for both firms.
D) There are two possible maximin outcomes --- Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium.
A
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If we are comparing the price of regular gasoline with the price of super gasoline, then an increase in the relative price of regular gasoline implies that
A) the nominal price of regular gasoline increased. B) the nominal price of super gasoline decreased. C) the relative price of super gasoline decreased. D) the relative price of regular gasoline increased.
The real balances effect says that an increase in the price level
A. Reduces the real value of a fixed amount of savings, consequently reducing the quantity of goods and services purchased. B. Increases the price of U.S. produced goods, causing foreign consumers to buy fewer U.S. goods. C. Increases the need to borrow, which drives up interest rates and reduces loan-financed purchases. D. Increases the price of U.S. produced goods, causing Americans to buy more imported goods.