Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $2 million, but firm B only makes $2 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $4 million. If firm A stays out, it earns zero while firm B earns $8 million. Which of the following are perfect equilibrium strategies?
A. (enter, soft)
B. (not enter, hard)
C. (enter, hard)
D. (not enter, soft)
Answer: A
Economics
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A substantial increase in the legal minimum wage will tend to
A) expand employment by increasing purchasing power and hence the demand for output. B) improve the position of the least skilled persons in the labor force. C) reduce employment by raising the cost of hiring some employees above their expected worth to potential employers. D) reduce the wages of highly skilled and highly paid employees.
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From 2010 to 2050, the inverse dependency ratio in the U.S. is expected to:
A. Rise from 1.2 to 1.8 B. Fall from 1.5 to 1.2 C. Remain stable at 2.1 D. Rise from 1.5 to 2.8
Economics