Firm 2's options set the price high This is a profit table for firm 1 and firm 2. Each firm has the option of setting price low or setting their price high. Set the price low Within the square are the Firm 1's options: Profits to firm 2-$7m/day profits to each firm. For Profits to firm 1 =$5m/day example, if each firm sets their price low, then firm 1 Set the price low will earn profits of $5m/day and firm 2 will earn profits of $7 m/day. Another example, if each firm sets the price high, then firm 1 will earn profits of $11/day and firm 2 will earn profits of $15m /day. Hopefully, you see the firms earn more profits if both set the price high than if they both set the price low. Using numbers from this profit table, explain why each firm will chose to set the price low. Profits to firm 2-$20m/day Set the price high Profits to firm 2-$5m/day Profits to firm 1-$20m/day Profits to firm 2 -$15m/day Profits to firm 1 =$4m/day Profits to firm 1 =$11m/day Remember each firm has the option of setting the price high or low and their goal is to make the greatest amount of profits, but the table states how profit each firm earns depending on the decision they make. You only must use 4 sentences that include the profits from the profit table to explain why each firm will choose to set the price low. 1. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low. Because 2. 2. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low Because 3. If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low. Because 4.If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low. Because

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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answer this This is a profit table for firm

1

 and firm 

2

Firm 2's options
set the price high
This is a profit table for firm
1 and firm 2. Each firm has
the option of setting price
low or setting their price
high.
Set the price low
Within the square are the
Firm 1's options:
Profits to firm
2-$7m/day
profits to each firm. For
Profits to firm
1 =$5m/day
example, if each firm sets
their price low, then firm 1 Set the price low
will earn profits of
$5m/day and firm 2 will
earn profits of $7 m/day.
Another example, if each
firm sets the price high, then
firm 1 will earn profits of
$11/day and firm 2 will earn
profits of $15m /day.
Hopefully, you see the firms
earn more profits if both set
the price high than if they
both set the price low. Using
numbers from this profit
table, explain why each firm
will chose to set the price
low.
Profits to firm
2-$20m/day
Set the price high
Profits to firm
2-$5m/day
Profits to firm
1-$20m/day
Profits to firm 2
-$15m/day
Profits to firm
1 =$4m/day
Profits to firm 1
=$11m/day
Remember each firm has the option of setting the price high or low and their goal is to make the greatest amount of
profits, but the table states how profit each firm earns depending on the decision they make. You only must use 4
sentences that include the profits from the profit table to explain why each firm will choose to set the price
low.
1. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low.
Because
2. 2. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low
Because
3. If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low.
Because
4.If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low.
Because
Transcribed Image Text:Firm 2's options set the price high This is a profit table for firm 1 and firm 2. Each firm has the option of setting price low or setting their price high. Set the price low Within the square are the Firm 1's options: Profits to firm 2-$7m/day profits to each firm. For Profits to firm 1 =$5m/day example, if each firm sets their price low, then firm 1 Set the price low will earn profits of $5m/day and firm 2 will earn profits of $7 m/day. Another example, if each firm sets the price high, then firm 1 will earn profits of $11/day and firm 2 will earn profits of $15m /day. Hopefully, you see the firms earn more profits if both set the price high than if they both set the price low. Using numbers from this profit table, explain why each firm will chose to set the price low. Profits to firm 2-$20m/day Set the price high Profits to firm 2-$5m/day Profits to firm 1-$20m/day Profits to firm 2 -$15m/day Profits to firm 1 =$4m/day Profits to firm 1 =$11m/day Remember each firm has the option of setting the price high or low and their goal is to make the greatest amount of profits, but the table states how profit each firm earns depending on the decision they make. You only must use 4 sentences that include the profits from the profit table to explain why each firm will choose to set the price low. 1. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low. Because 2. 2. If firm 1 sets the price high, the optimal choice for firm 2 is to set the price low Because 3. If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low. Because 4.If firm 2 sets the price high, the optimal choice for firm 1 is to set the price low. Because
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