Why does a collusive agreement to restrict output and raise price create a game like the prisoners' dilemma?
What will be an ideal response?
Each firm has the possibility of sharing monopoly profits with other members of the cartel if each firm complies with the agreement. But each firm has an incentive to cheat on the collusive agreement in a cartel. If they all cheat, the outcome for each firm is worse than if they had all held to the agreement.
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Why do some people think that the productivity slowdown since 1973 is just a return to normalcy after fast productivity growth during the previous 25 years?
A) Productivity growth of the previous 25 years was abnormally low. B) The Great Depression and World War II had prevented technological opportunities from being exploited. C) The United States is the only country to face the slowdown, due to poor regulatory decisions. D) The United States has allowed countries like Japan to steal its technological breakthroughs.
Jane's utility function is represented as: U = F0.5 C0.5, F is quantity of food and C is quantity of clothing. If her budget constraint is represented as: 120 = 2F + C, her optimal bundle of consumption should be
A) (40F, 40C). B) (20F, 60C). C) (50F, 50C). D) (45F, 20C).