When Goodyear increases its production when Michelin reduces its production, Goodyear is playing a
A) negative-sum game.
B) cooperative game.
C) non-cooperative game.
D) reaction function game.
Answer: C
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Robert and Janet are discussing unemployment and inflation in their country. Robert, on the basis of a recent newspaper report, claims that a 5% reduction in unemployment will lead to a 2% rise in inflation
On the other hand, Janet insists that inflation is a far bigger problem than unemployment and should be addressed with prime importance. Classify Robert's and Janet's statements as descriptive or advisory. Explain your answer.
The principal-agent problem is a problem
A) caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. B) caused by agents pursuing their own interests rather than the interests of the principals who hired them. C) of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. D) that exists when a person (principal) has more information about the task than the agent he hires to perform the task.