The question is intermediate microeconomics Question 1 (Game Theory)Two firms, Firm A and Firm B, are the only producers in a market for a particular good.Each firm can choose to produce either Low or High output. If both firms choose Low output,the payoffs are (300, 250) (throughout, a pair of payoffs (x, y) represents x profits for FirmA, and y profits for Firm B). If they choose different outputs the payoffs are (200, 75) whenFirm A chooses High output and (200, 100) when Firm A chooses Low output. If both firmschoose High output, the payoffs are (x', y').a. Are there any values for x' and y' such that there are two Nash equilibria in purestrategies? If yes, for what values of x' and y'? If no, carefully explain why not.b. Are there any values for r' and y' such that there is a dominant strategy equilibriumin which both firms play High? If yes, for what values of x' and y'? If no, carefullyexplain why not.c. Are there any values for r' and y' such that Firm A has a dominant strategy but FirmB does not? If yes, for what values of x' and y'? If no, carefully explain why not.

Game theory is a theoretical framework for conceiving social situations among competing participants…

a. Are there any values for r' and y' such that there are two Nash equilibria in pure strategies? If yes, for what values of x' and y'? If no, carefully explain why not. b. Are there any values for x' and y' such that there is a dominant strategy equilibrium in which both firms play High? If yes, for what values of x' and y? If no, carefully explain why not. c. Are there any values for r' and y' such that Firm A has a dominant strategy but Firm B does not? If yes, for what values of x' and y'? If no, carefully explain why not.

a. Are there any values for r' and y' such that there are two Nash equilibria in pure strategies? If yes, for what values of x' and y'? If no, carefully explain why not. b. Are there any values for x' and y' such that there is a dominant strategy equilibrium in which both firms play High? If yes, for what values of x' and y? If no, carefully explain why not. c. Are there any values for r' and y' such that Firm A has a dominant strategy but Firm B does not? If yes, for what values of x' and y'? If no, carefully explain why not.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The question is intermediate microeconomics

Study of decisions made by households and business firms at an individual level. It includes several laws and theorems related to demand, supply, production, allocation of resources, and prices.

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Consider the model of a firm that produces final goods using R&D and components as inputs, with cost dataas follows:Assembly: Total cost of production = PAQA = 400Earnings of High-Skilled Labor = WHHA = 100Earnings of Low-Skilled Labor = WLLA = 200Earnings of Capital = RKA = 100R&D: Total cost of production = PRQR = 400Earnings of High-Skilled Labor = WHHR = 175Earnings of Low-Skilled Labor = WLLR = 125Earnings of Capital = RKR = 100A) In which factor(s) is assembly intensive? In which factor(s) is R&D intensive?B) Suppose that due to the opening of trade, the price of assembly falls by ∆PAPA= −20%, the price of R&Dremains unchanged, ∆PRPR= 0%, and capital’s share earnings remains constant.C) What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?