Situation 37-2 Dan and Ann Live in the Same Community

question 76

Multiple Choice

Situation 37-2 Dan and Ann live in the same community and both can participate in two activities, producing and stealing.
Refer to Situation 37-2.  Both Dan and Ann realize that they are better off producing and not stealing from each other than producing and stealing from each other.  They agree not to steal from each other.  There is no enforcer of their agreement to not steal.  It is likely that

• A)Dan and Ann are in a prisoner's dilemma setting.
• B)Dan is in a prisoner's dilemma setting but Ann is not.
• C)Ann is in a prisoner's dilemma setting but Dan is not.
• D)neither Dan nor Ann is in a prisoner's dilemma setting.

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Definitions:

Total Cost

The aggregate amount of expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Economic Profit

The variance between gross receipts and all outlays, including both tangible and intangible costs.

Accounting Profit

The total revenue of a business minus the explicit costs of operating, not including opportunity costs.

Implicit Costs

The opportunity costs that are not directly paid out but represent the loss of potential income from using resources in a certain way.