Monopolistic competition has at least one similarity to perfect competition: firms are free to enter and leave the industry

Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model:

Firm B cuts Firm B colludes Firm A cuts 6,6 24,8 Firm A colludes 8,24 12,12 Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game? A) Both firms cut prices. B) Both firms collude. C) There are two Nash equilibria: A cuts and B colludes, and A colludes and B cuts. D) There are no Nash equilibria in this game.

Because business firms often finance new investments with borrowed money, a key determinant of investment spending is

a. tax rates. b. the price level. c. the rate of inflation. d. the real interest rate.