What happens in a duopoly if both firms try to act as the Stackelberg leader?
What will be an ideal response?
If both firms think they are the leader, they will maximize profits subject to the other firm's response function. Each firm will produce twice what the other firm thinks it is producing. As a result, output and price are driven to the competitive equilibrium.
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Compared to high-income countries, low-income countries might have an advantage in achieving higher rates of worker productivity and economic growth in the future. This is because:
a. the economic growth rate begins to diminish as capital deepening increases in high-income countries. b. the invention of new technology is subject to diminishing marginal returns in high-income countries. c. the cost of adaption to new technology is lower in low-income countries than in high-income countries. d. the marginal cost of production decreases more in low-income countries than in high-income countries.
Refer to the graph. Which of the three Security Market Lines would represent a situation where investors do not care about the risk level of a financial asset?
A. Line A.
B. Line B.
C. Line C.
D. None of these.