Suppose That Both the Equilibrium Price and Quantity of Ketchup

question 11

Multiple Choice

Suppose that both the equilibrium price and quantity of ketchup fall. The most consistent explanation for these observations is:

• A)a decrease in demand for ketchup with no change in supply.
• B)an increase in demand for ketchup with no change in supply.
• C)an increase in demand for ketchup and a decrease in the supply of ketchup.
• D)an increase in the supply of ketchup with no change in demand.

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Definitions:

Extensive Form

A representation of a game in decision tree format, showing the sequence of moves, possible strategies, and outcomes.

Credible Threat

In a sequential game with two players, a statement made by Player 1 that truthfully (credibly) threatens a penalizing action against Player 2 if Player 2 does something that Player 1 does not want Player 2 to do. Opposite of empty threat.

Coercion

Coercion refers to the practice of persuading someone to do something by using force or threats.

Empty Threat

A declared intention to perform an action that is not actually intended to be carried out, often used as a strategic bluff.