The two firms in an industry are deciding whether to advertise. The profit to each firm depends on the other firm’s decision. The first entries in the matrix below indicate the profit earned, in millions of dollars, by Firm A; and the second entries indicate the profits earned, in millions of dollars, by Firm B. Table: Firm A and Firm B Payoff Matrix Nature View Firm A Advertise Do Not Advertise Advertise $7, $1 $5, $4 Do Not Advertise $3, $2 $2, $0 The combination where Firm A advertises and Firm B does not advertise is Nash equilibrium because

Which of the following statements about income inequality is true?

Which of the following best demonstrates nonrivalry in consumption?

A firm uses capital and labor in its production process. The marginal product for the last unit of labor is 5, the marginal product for the last unit of capital is 10, and the wage is $10.At what cost of hiring each unit of capital would the firm be minimizing the cost of the current output?

Table: Distribution of Income in Country X in 2010 Before and After Taxes Quintile Before Taxes and Transfers After Taxes and Transfers Lowest 20 percent 1.1 5.1 Second 20 percent 7.9 11.1 Third 20 percent 15.5 16.5 Fourth 20 percent 24.7 23.8 Highest 20 percent 50.7 43.5 The table above shows the distribution of income in Country X in 2010 before and after taxes and transfer payments. Which of the following can be concluded about the effect of the government’s tax and transfer policies on income distribution in Country X?

A perfectly competitive market produces the socially efficient level of output when the marginal social benefit of the last unit of output produced is

National defense is an example of a public good because

Assume the government introduces a lump-sum tax on each firm within a perfectly competitive industry. Which of the following will be true after the introduction of this tax?

Country A has a Gini coefficient of 0.5, and Country B has a Gini coefficient of 0.3. Which of the following statements is definitely true?

The following graph illustrates the market for balloons. This graph illustrates the market for balloons, with price on the vertical axis ranging from $2 to $8 and quantity on the horizontal axis. It includes a downward-sloping demand curve labeled D, and two upward-sloping supply curves: the original supply curve labeled S, and a second curve labeled S plus Tax representing the effect of a tax. Dashed lines indicate an initial equilibrium price of $5 with a quantity of 90 balloons, and a new equilibrium after the tax at a price of $6 with a quantity of 60 balloons. Horizontal and vertical dashed lines connect these points to the axes, showing how the tax shifts the supply curve upward and reduces the equilibrium quantity in the balloon market. Use the graph to answer questions a-f. Calculate the area of consumer surplus before the tax. Show your work. (3 points) What is the value of the tax in the graph below? How do you know? (3 points) What is the after tax price the sellers keep? (2 points) Calculate the total tax revenue. Show your work. (2 points) Calculate consumer surplus after the tax. Show your work. (2 points) Between the prices of $5 and $6, is demand relatively elastic, relatively inelastic, unit elastic, perfectly inelastic, or perfectly elastic? Explain your answer. (3 points)