Intel and AMD are a duopoly that produces CPU chips. Intel and AMD can conduct R&D or they cannot conduct R&D. The table above shows the payoff matrix for the two firms. The numbers are millions of dollars of profit
The Nash equilibrium is for Intel to ________ and for AMD to ________. A) conduct R&D; conduct R&D
B) conduct R&D; not conduct R&D
C) not conduct R&D; conduct R&D
D) not conduct R&D; not conduct R&D
E) conduct R&D; either conduct R&D or not conduct R&D, the equilibrium could be either choice for AMD
A
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Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive
Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets? A) In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run. B) In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium. C) In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets. D) In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium.
Answer the following statement(s) true (T) or false (F)
1. In long-run equilibrium, perfectly competitive firms make zero economic profits. 2. In a constant-cost industry, cost curves do not change as output changes. 3. In an increasing-cost industry, cost curves decrease as industry output increases. 4. External diseconomies of scale involve factors that are mostly within the firm’s control. 5. A decreasing-cost industry is one where input prices fall as industry output rises.