Question 1: Which of the following is not a basic feature of a monopolistically competitive industry?
a. There are many buyers and sellers in the industry
b. Each firm in the industry produces a differentiated product
c. There is free entry and exit into the industry
d. Each firm owns a patent on its product
Question 2: Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should
a. close her doors immediately because she losing money.
b. continue producing in the short run, but plan to go out of business in the long run.
c. raise her prices above the perfectly competitive level.
d. lower her output.
Question 3: The prisoner's dilemma refers to games where
a. neither player has a dominant strategy.
b. one player has a dominant strategy and the other does not.
c. both players have a dominant strategy which results in the largest possible payoff.
d. both players have a dominant strategy which results in a lower payoff than their dominated strategies.