14. Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets. The government imposes a new $5 million tax to open retail outlets. What is the expected outcome of the new payoff matrix, given the tax? The Nash equilibrium is for Company A to not open retail outlets and for Company B to open retail outlets. The Nash equilibrium is for Company A to open retail outlets and for Company B to not open retail outlets. The Nash equilibrium is for both Company A and Company B to open retail outlets. The Nash equilibrium is for both Company A and Company B to not open retail outlets. There is no Nash equilibrium after the change given in the scenario.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
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Chapter1: Making Economics Decisions
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14.
Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets.


The government imposes a new $5 million tax to open retail outlets. What is the expected outcome of the new payoff matrix, given the tax?
The Nash equilibrium is for Company A to not open retail outlets and for Company B to open retail outlets.
The Nash equilibrium is for Company A to open retail outlets and for Company B to not open retail outlets.
The Nash equilibrium is for both Company A and Company B to open retail outlets.
The Nash equilibrium is for both Company A and Company B to not open retail outlets.
There is no Nash equilibrium after the change given in the scenario.

 

5. The allocatively efficient quantity of product Z for the whole market is 2 million units. At that quantity, the demand for Z is at $5 and the average total cost for its single supplier is $7. The average total cost does not fall to $5 until 3.5 million units. Based on this data, the market for product Z is 

perfectly competitive
a natural monopoly
a legal monopoly
monopolistically competitive
productively efficient

 

Company B
Retail outlets No retall outlets
Company A Retail outlets
$25, $25
$30, $15
No retail outlets $35, $35
$34, $20
Transcribed Image Text:Company B Retail outlets No retall outlets Company A Retail outlets $25, $25 $30, $15 No retail outlets $35, $35 $34, $20
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