Econ 101 Final

Choose the statement that explains how the following event affects the equilibrium price and quantity of pizza. The incomes of consumers rise and pizza is an inferior good. A)There will be a leftward shift of the demand curve and, as a result, the equilibrium price and quantity of pizza will fall. B)There will be a leftward shift of the supply curve and, as a result, the equilibrium price and quantity of pizza will rise. C)There will be a rightward shift of the supply curve and, as a result, the equilibrium price and quantity of pizza will fall. D)There will be a rightward shift of the demand curve and, as a result, the equilibrium price and quantity of pizza will rise.

A)

Look at the figure The Gasoline Market. The pretax equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An excise tax has been levied on each gallon of gasoline supplied by producers. Based on the graph, the incidence of the tax on suppliers is: A)$0.75. B)$1.25. C)$1. D)$15,000.

A) $0.75

(Table: Prices and Demand) Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce? Correct A)6 B)4 C)3 D)5

A) 6

Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a singleprice monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film. Price: 10, 8, 6, 4, 2, 0 Q(demanded): 0, 1, 3, , 6, 10, , 15 Ben wants to maximize profit. Which price would he choose? How many downloads would be sold? A)Ben would charge $6; 3 downloads would be sold. B)Ben would charge $0; 15 downloads would be sold. C)Ben would charge $4; 6 downloads would be sold. D)Ben would charge $8; 1 download would be sold.

A) Ben would charge $6; 3 downloads would be sold?

Suppose the United States removes sugar quotas and the market price of sugar drops. If the demand curve for candy bars is downward-sloping, in the candy bar market we would expect: A)the consumer surplus to increase. B)the consumer surplus to decrease. C)the consumer surplus to be unchanged. D)the deadweight loss to increase.

A) CS to increase

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that: A)the United States has a comparative advantage in the production of automobiles. B)Japan has a comparative advantage in the production of automobiles. C)the United States has an absolute advantage in the production of steel. D)Japan has a comparative advantage in the production of both goods.

A) US has comparative advantage in production of automobiles

The field of law that attempts to limit the ability of oligopolists to collude and restrict competition is called: A) antitrust policy. B) product safety policy. C) fuel efficiency standards. D) excise tax policy.

A) antitrust policy

Use of the midpoint method to calculate the price elasticity of demand eliminates the problem of computing: A)different elasticities, depending on whether price decreases or increases. B)different elasticities, because price and quantity are inversely related on the demand curve. C)total revenue when price falls and demand is inelastic. D)total revenue when price falls and demand is elastic.

A) diff. elasticities, depending on whether price decreases or increases

Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town. Gary and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of: A) a dominant strategy. B) a tit-for-tat strategy. C) an irrational strategy. D) product differentiation.

A) dominant strategy

Buffalo Aircraft doubles the amount of all of the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs is unchanged, this means that Buffalo Aircraft is operating with: A)economies of scale. B)increasing average total cost. C)decreasing average variable cost. D)increasing marginal cost.

A) economies of scale

Market power in the United States was often gained in the latter part of the nineteenth century by: A) forming trusts. B) the growth of competition. C) international arrangements with Russian and Japanese firms. D) opening up more industries to international trade.

A) forming trusts

The production possibility frontier illustrates that: A)if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. B)the economy will automatically end up at full employment. C)an economy's productive capacity increases one-for-one with its population. D)how much of one good an economy must give up to get more of another good regardless of whether resources are being used efficiently.

A) if all resourced of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

Given any upward-sloping supply curve for a good, the more inelastic the demand curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax. A)less; smaller B)less; larger C)more; smaller D)more; larger

A) less; smaller

In perfect competition, the assumption of easy entry and exit implies that in the _____ run all firms in the industry will earn _____ economic profits. A)long; zero B)long; positive C)short; zero D)short; positive

A) long; zero

Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by: A) producing more than the quantity that maximizes joint profits. B) producing less than the quantity that maximizes joint profits. C) charging more than the price that maximizes joint cartel profits. D) advertising less than will maximize joint cartel profits.

A) producing more than the quantity that maximizes joint profits

When the government removes a binding price floor: A)quantity demanded will increase and quantity supplied will decrease. B)quantity demanded will decrease and quantity supplied will increase. C)excess demand will develop. D)excess supply will develop.

A) quantity demanded will increase and quantity supplied will decrease

The downward-sloping demand curve for a monopolistically competitive firm: A) reflects product differentiation. B) eventually will become perfectly elastic as more firms enter. C) indicates collusion among firms in the industry. D) ensures that the firm will produce at minimum average cost in the long run.

A) reflects product differentiation

. (Figure: Monopolistic Competition VI) The figure Monopolistic Competition VI illustrates (a loss where P is less than ATC) a firm in the _____; in the _____, the demand and marginal revenue curves will shift to the _____. A) short run; long run; right B) long run; short run; left C) short run; long run; left D) long run; short run; right

A) short run; long run; right

If $100 tax per ticket is imposed, the deadweight loss is _____ while the tax revenue is _____. (look at graph in notes) A)$1,250; $7,500 B)$2,500; $10,000 C)$2,500; $7,500 D)$2,500; $20,000

A)$1,250; $7,500 ([25][50]/2)+([25][50]/2)=1250

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in the next Table. Current table shows aggregated demand. The average cost and the marginal cost of production are constant at $2 per tube. Quantity Demanded in Middle Fall (tubes per week) 1, 2, 3, 4, 5 Price per Tube $8, 7, 6, 5, 4 Quantity Demanded in West Fall 1, 2, 3, 4, 5 (tubes per week) Price per Tube $5, 4.5, 4, 3.5, 3 Neem can effectively price discriminate charging a higher price to ___ who have the ___ demand for the product. A)Middle Fall; less elastic B)West Fall; more elastic C)West Fall; less elastic D)Middle Fall; more elastic

A)Middle fall; less elastic

In the long run: A)all factors are variable. B)all factors are fixed. C)production choices are more limited than in the short run. D)production is always greater than zero.

All factors are variable

The table shows the consumers' willingness to pay and the producers' costs. Note that consumers and producers in this market are not willing to consume or produce more than four peppers at any price. Total surplus (consumer surplus plus producer surplus) at equilibrium(p=$0.5 and Q=5) is A)$4.4 B)$2.1 C)$1.1 D)$0.9 E)$1.0

B) $2.1

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly, and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets, Margaret's profit will be _____, and Ray's profit will be _____. A) $1500; $1,000 B) $900; $600 C) $1,400; $1,000 D) $1,000; $1,400

B) $900; $600

Q (study time)= 16, 12, 8, 4, 0 Q(leisure time= 0, 4, 8, 12, 16 (Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. If a student decides to consume one additional hour of leisure time, how many hours of study time must she give up? A)0.25 B)1 C)16 D)4

B) 1 (find slope)

Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is INCORRECT? Price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition. A)Price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition. B)In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market. C)When a monopoly exists, the consumer surplus is less than if the market were perfectly competitive. D)Monopoly output will be less than the output of a comparable perfectly competitive industry.

B) In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy. A) stabilization B) antitrust C) fiscal D) government

B) antitrust

The _____ cost curve is NOT affected by diminishing returns. A)average variable B)average fixed C)Marginal D)average total

B) average fixed

(Figure: Prisoners' Dilemma for Thelma and Louise) Look at the Figure Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for murder. Given the payoff matrix in the figure, the Nash equilibrium behavior is for Thelma _____ and Louise _____. A) to confess; not to confess (bottom L B) to confess; to confess (bottom R corner C) not to confess; to confess (top R) D) not to confess; not to confess (top L)

B) both confess (bottom R corner)

According to data from the U.S. Department of Agriculture's National Agricultural Statistics Service, 124 million acres of land in the United States were used for wheat or corn farming in 2004. Of those 124 million acres, farmers used 50 million acres to grow 2.158 billion bushels of wheat and 74 million acres of land to grow 11.807 billion bushels of corn. Suppose that U.S. wheat and corn farming is efficient in production. At that production point, the opportunity cost of producing one additional bushel of wheat is 1.7 fewer bushels of corn. However, farmers have increasing opportunity costs, so that additional bushels of wheat have an opportunity cost greater than 1.7 bushels of corn. For the following production point, decide whether that production point is (i) feasible and efficient in production, (ii) feasible but not efficient in production, (iii) not feasible, or (iv) unclear as to whether or not it is feasible. Farmers use 40 million acres of land to produce 1.8 billion bushels of wheat, and they use 60 million acres of land to produce 9 billion bushels of corn. The remaining 24 million acres are left unused. This production point is: A)unclear as to whether or not it is feasible. B)feasible but not efficient in production. C)not feasible. D)feasible and efficient in production.

B) feasible but not efficient

In long-run equilibrium in monopolistic competition: A) price is greater than average total cost. B) price is equal to average total cost at an output below where average total cost is minimized. C) price is equal to average total cost at its minimum. D) price is equal to average total cost at an output above where average total cost is minimized.

B) price is equal to average total cost at an output below where ATC is minimized

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that: A)government policies can change spending. B)there are gains from trade. C)markets usually lead to efficiency. D)markets move toward equilibrium.

B) there are gains from trade

Argentina and Brazil each have 10,000 hours of labor per month. In Argentina, producing one pound coffee requires 2 hours while producing one bottle wine requires 4 hours. In Brazil, producing one pound coffee requires 1 hour when producing one bottle wine requires 5 hours. Which country has an absolute advantage in the production of coffee? Which country has a comparative advantage in the production of wine? A)Argentina has an absolute advantage in coffee; Argentina has a comparative advantage in wine B)Brazil has an absolute advantage in coffee; Argentina has a comparative advantage in wine C)Argentina has an absolute advantage in coffee; Brazil has a comparative advantage in wine D)Brazil has an absolute advantage in coffee; Brazil has a comparative advantage in wine

B)Brazil has absolute advantage in coffee; Argentina has comparative advantage in wine

An extreme case of oligopoly in which firms collude to raise joint profits is known as a: A) duopoly. B) cartel. C) dominant producer. D) price war.

B)cartel

If a perfectly competitive gardening shop sells 30 evergreen bushes at $10 per bush, its marginal revenue is: A)$300. B)less than $10. C)$10. D)more than $10

C) $10

Now that French consumers can also buy lobsters, the quantity demanded when the price is 25 is equal to ____ pounds. The new equilibrium price of lobsters is ______ per pound, and the new equilibrium quantity of lobsters is _____ pounds. The quantity consumed by U.S. consumers is now _____ pounds. A)300; $15; 300; 400 B)400; $20; 700; 300 C)300; $20; 700; 400 D)300; $20; 700; 300

C) 300; $20; 700; $40

Look at the figure The Market for Yachts. A price _____ of _____ will bring the about the same price and output in the market for yachts as would an excise tax of $60,000. A)ceiling; $80,000 B)floor; $100,000 C)floor; $160,000 D)ceiling; $160,000

C) Floor of $160,000

A perfectly competitive industry is said to be efficient because the: A)marginal cost of production of the last unit of output is minimized. B)product is standardized across firms in the industry. C)average total cost of production of the industry's output is minimized. D)market price of the good is equal to economic profit for all firms in the industry.

C) average total cost of production of industry's output is minimized

(Table: Coke and Pepsi Advertising Game) Look at the table Coke and Pepsi Advertising Game. The soft-drink industry is dominated by Coca-Cola and Pepsi, and each firm spends a lot of money on advertising. Suppose each firm is considering a costly television commercial during halftime of the Super Bowl. The table shows the payoff matrix of profits that each firm would receive from their advertising decision, given the advertising decision of their rival. Profits in each cell of the payoff matrix are given as (Coke, Pepsi). If both firms expect to play this game every year for the foreseeable future, in the outcome Coke _____ and Pepsi _____. A) advertises; does not advertise B) does not advertise; advertises C) does not advertise; does not advertise D) advertises; advertises

C) does not advertise; does not advertise

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective? A)appealing to the polluter to be a good citizen B)publicizing the harmful effects of pollution C)imposing a tax per unit of pollution generated D)All three methods are equally effective.

C) imposing a tax per unit of pollution generated

In an oligopoly market, collusion between firms usually leads to higher profits than noncooperative behavior. However, formal, overt collusion doesn't usually occur in the United States because: I. it is illegal. II. there is an incentive for each firm to cheat on a collusive agreement. III. an oligopolistic firm will typically prefer lower profits if the only way to make higher profits is to improve the profit position of its rivals. A) I only. B) II only. C) I and II. D) II and III.

C) its illegal, and there is an incentive for each firm to cheat on a collusive agreement

Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE? A)Price is equal to marginal cost. B)Marginal cost is equal to marginal revenue. C)Marginal cost is less than average variable cost. D)Marginal cost is less than average total cost.

C) marginal cost is less than average variable cost

Because most communities have a large number of similar but not identical substitutes, the market for chiropractors is best considered to be: A) an oligopoly. B) perfect competition. C) monopolistically competitive. D) a monopoly

C) monopolistically competitive

In many European countries high minimum wages have led to high levels of unemployment and underemployment, and to a two-tier labor system. In the formal labor market, workers have good jobs that pay at least the minimum wage. In the informal, or black market for labor, workers have poor jobs and receive less than the minimum wage. Assume that the imposition of the high minimum wage causes a contraction in the economy so that employers in the formal sector cut their production and their demand for workers. Assume also that the workers who cannot get a job paying at least the minimum wage move into the informal labor market where there is no minimum wage. What happens to the size of the informal market for labor as a result of the economic contraction? What happens to the equilibrium wage in the informal labor market? A)The equilibrium wage in the informal labor market falls and the quantity of hours transacted falls, as the informal labor market expands. B)The equilibrium wage in the informal labor market increases and the quantity of hours transacted falls, as the informal labor market shrinks. C)The equilibrium wage in the informal labor market falls and the quantity of hours transacted increases, as the informal labor market expands. D)The equilibrium wage in the informal labor market increases and the quantity of hours transacted increases, as the informal labor market expands.

C) the equilibrium wage in the informal labor market falls and the quantity of hours transacted increases, as the informal labor market expands

Market structures are categorized by: A)whether products are differentiated and the extent of advertising. B)the number and size of the firms. C)the number of firms and whether products are differentiated. D)the size of the firms and the extent of advertising.

C) the number of firms and whether products are differentiated

In class activity, we used the three-step method to analyze the effects of each event on the equilibrium price and quantity of music downloads. Event A: A fall in the price of CDs Event B: Sellers of music downloads negotiate a reduction in the royalties they must pay for each song they sell. Event C: Events A and B both occur. Suppose that Event C occurs (thus, supply increases and demand decreases). What is the most likely effect on price and quantity of music downloads? A)The price will increase, but quantity may increase, decrease, or stay the same. B)The price will increase and quantity will increase. Correct C)The price will decrease, but quantity may increase, decrease, or stay the same. D)The price will decrease and quantity will decrease

C) the price will decrease, but quantity may increase, decrease, or stay the same

The basic concern of microeconomics is A)to prove that capitalism is better than socialism. B)to use unlimited resources to produce goods and services to satisfy limited wants. C)to study the choices people make. D)to keep business firms from losing money.

C) to study the choices people make

(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic Competitor produces at its profit-maximizing level, it will produce: A) with excess capacity, since its P is greater than MC. B) without excess capacity, since P is greater than ATC. C) with excess capacity, since that output level is on the downward-sloping portion of the ATC curve. D) without excess capacity, since that output level is on the downward-sloping portion of the MR curve.

C) with excess capacity, since P is greater than ATC

Suppose Linda and Jack are doing Biology and Economics homework. In one hour, Linda can solve 10 Biology questions and 0 Economics questions, or 20 Economics questions and 0 Biology questions, or any other linear combination lying on the line between those two points. In the same amount of time, Jack can solve 20 Biology questions and 0 Economics questions, or 30 Economics questions and 0 Biology questions, or any other linear combination lying on the line between those two points. Since Linda has a lower opportunity cost of doing Economics questions than Jack, if they work together, Linda will specialize in Economics answers and Jack will specialize in Biology answers. If they were to trade with each other, what is the best answer for the price range (in terms of the number of solved Economics problems) acceptable to both Linda and Jack for a solved Biology question? A)the price of 1 Biology answer is 2 Economics answers. B)the price of 1 Biology answer is 3/2 Economics answers. C)The price of 1 Biology answer is between 3/2 and 2 Economics answers. D)the price of 1 Biology answer is between 0 and 3/2 Economics answers.

C)the price of 1 bio answer is btw 3/2 and 2 econ answers

a consumer's WTP reflects: A)the equilibrium price of the good or service. B)the cost of producing the good or service. C)the minimum price at which he or she would buy the good or service. D)the maximum price at which he or she would buy the good or service.

D

Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve. If the supply curve shifts downward, equilibrium price will _____, equilibrium quantity will _____, consumer surplus will _____, and producer surplus will _____. A)decrease; decrease; increase; not change B)decrease; increase; not change; increase C)decrease; increase; increase; decrease D)decrease; increase; increase; not change

D)

Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is _______ and the price effect of selling the sixth motor home is _________. A)$20,000; $20,000. B)$10,000; -$5,000. C)$15,000; $20,000 D)$20,000; -$5,000

D) $20,000; -$5,000

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is deadweight loss when the monopolist maximizes profit? A)$20 B)$0 C)$160 D)$80

D) $80

Which of the following illustrates the change in demand (i.e., shift of the demand curve)? A)Consumers buy more personal computers because prices have fallen. B)When XYZ Telecom (a long-distance telephone service provider) offered reduced rate on weekends, its volume of weekend calling increased sharply. C)A sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce their gasoline purchases. D)People buy more long-stem roses the week of Valentine's Day, even though the prices are higher than at other times during the year.

D) People buy more long-stem roses the week of Valentine's Day, even though prices are higher than at other times during the year

(Figure: Payoff Matrix I for Blue Spring and Purple Rain) The figure Payoff Matrix I for Blue Spring and Purple Rain refers to two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Purple Rain is to: A) charge a low price. B) charge a high price. C) adopt the same strategy as Blue Spring. D) Purple Rain does not have a dominant strategy.

D) Purple Rain doesn't have a dominant strategy

The term diminishing returns/product refers to: A)a falling interest rate that can be expected as one's investment in a single asset increases. B)a decrease in total output due to the firm hiring uneducated workers. C)a reduction in profits caused by increasing output beyond the optimal point. D)a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. If the industry were perfectly competitive, the output would be _____ gadgets, and the price would be _____. A) 0; $10 B) 500; $5 C) 600; $4 D) 800; $2

D) because the price they charge has to be same as cost so they make $0 profit (can't make profit in perfectly competitive market)

If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price: A)total surplus is minimized. B)there is some deadweight loss. C)a few mutually beneficial trades are missed. D)consumer and producer surplus are maximized.

D) consumer and producer surplus are maximized

The sources of product differentiation do NOT include: A) differences in location. B) differences in quality. C) the perception by consumers that products are different, even if they are physically identical. D) consumers' value in uniformity

D) consumer's value in uniformity

Monopolistic competition is similar to perfect competition because firms in both market structures: A) are price takers. B) produce goods that are perfect substitutes. C) find it beneficial to advertise. D) do not face any barriers to entry to the industry in the long run.

D) do not face any barriers to entry to the industry in the long run

A common example of monopolistic competition is the market for: A) oranges. B) 1-inch nails. C) automobiles. D) gas stations.

D) gas stations

A natural monopoly exists whenever a single firm: A)has gained control over a strategic input of an important production process. B)is owned and operated by the government. C)is investor owned but has been granted the exclusive right by the government to operate in a market. D)has economies of scale over the entire range of production that is relevant to its market.

D) has economies of scale over the entire range of production that is relevant to its market

Economic profit is: A)always equal to accounting profit. B)greater than accounting profit if implicit costs exist. C)less than accounting profit if implicit costs are zero. D)less than accounting profit if implicit costs exist.

D) less than accounting profit is implicit costs exist

An economy is efficient if it is: A)possible to produce more of all goods and services. B)possible to produce more of one good without producing less of another. C)producing a combination of goods. Correct D)not possible to produce more of one good without producing less of another good.

D) not possible to produce more of one good w/out producing less of another good

As long as people have different _____, everyone has a comparative advantage in something. A)direct costs B)benefits C)utility D)opportunity costs

D) opportunity costs

Which of the following is NOT a characteristic of monopolistic competition? A) product differentiation B) lack of barriers to entry and exit in the long run C) many competing producers D) tacit (implied) collusion

D) tacit (implied)collusion

Look at the figure Supply and Demand in Agriculture. If a price floor at P4 is set to help improve farm incomes and the government wants to assure farmers that their output will be purchased, the government must purchase an amount of output equal to: A)Q3 - Q1. B)Q1 - Q3. C)Q2 - Q1. D)Q3 - Q0.

D)Q3-Q0

what does the diminishing return effect look like on a chart?

When the ATC starts increasing again

what is a dominant strategy

it's best for a player in a game regardless of the other players' strategy

what is ti-for-tat strategy

playing whatever the other player did in previous period

what does the spreading effect look like on a chart?

the ATC is decreasing until a certain point