The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the outcome will be that the incumbent
A) deters entry.
B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway.
C) chooses the Stackelberg leader level of output and the potential entrant enters.
D) deters entry and earns zero profit.
A
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Assume that the United States imposes a quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of quotas, the equilibrium price of shoes in the United States will most likely _______ , and the equilibrium price of shoes in Italy will most likely _______ .
A) increase; decrease B) decrease; remain the same C) decrease; increase D) increase; remain the same
Graphically illustrate (using the WS and PS relations) and explain the effects of an increase in the markup on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output
What will be an ideal response?