P. MC P1 ATC P2 D E P. Ps Demand MR P. Q, Q, Free Response Question, AP Microeconomics. la. Steverail has a monopoly on train service between two cities. If Steverail goes unregulated by the government what is the quantity and price that will prevail in the graph above? Explain. b. The government decides that they should regulate the monopoly and require them to set a price and quantity that is socially optimal. What price and quantity will Steverail then be required to set? Explain. c. What if instead, the government decided to regulate Steverail based on having a "fair return." What would be the required price and quantity? Explain. d. Between what two points is Steverail's demand curve inelastic? Explain. e. What kind of tax or subsidy could the government implement to achieve a more socially optimal level of output in this market? Explain. Free Response Question #2. Pie Crust and Pizza Joint are two competing businesses sell pizza and their success is based on the other's decision. The outcomes of the two competing businesses are shown below in profit, written in thousands of dollars. Pie Crust is at the left and Pizza Joint is at the top. Advertise Don't Advertise Advertise | 20, 16 | 14, 18 Don't Advertise 19, 13 14, 19 Based on the payoff matrix shown, what are the dominant strategies of. a. i. Pie Crust? ii. b. Based on the payoff matrix, what is the Nash Equilibrium that will be achieved? Pizza Joint? What kind of market structure are these two firms competing in? How do you know? d. Let's say that Pie Crust and Pizza joint both decide to collude and are able to do so under the C. law. What would happen with the price and quantity? e. Let's say that both firms decide to not advertise anymore and their sales are not impacted. However, their advertising costs decreases by $20. Redraw the payoff matrix showing the new profits of the business.
P. MC P1 ATC P2 D E P. Ps Demand MR P. Q, Q, Free Response Question, AP Microeconomics. la. Steverail has a monopoly on train service between two cities. If Steverail goes unregulated by the government what is the quantity and price that will prevail in the graph above? Explain. b. The government decides that they should regulate the monopoly and require them to set a price and quantity that is socially optimal. What price and quantity will Steverail then be required to set? Explain. c. What if instead, the government decided to regulate Steverail based on having a "fair return." What would be the required price and quantity? Explain. d. Between what two points is Steverail's demand curve inelastic? Explain. e. What kind of tax or subsidy could the government implement to achieve a more socially optimal level of output in this market? Explain. Free Response Question #2. Pie Crust and Pizza Joint are two competing businesses sell pizza and their success is based on the other's decision. The outcomes of the two competing businesses are shown below in profit, written in thousands of dollars. Pie Crust is at the left and Pizza Joint is at the top. Advertise Don't Advertise Advertise | 20, 16 | 14, 18 Don't Advertise 19, 13 14, 19 Based on the payoff matrix shown, what are the dominant strategies of. a. i. Pie Crust? ii. b. Based on the payoff matrix, what is the Nash Equilibrium that will be achieved? Pizza Joint? What kind of market structure are these two firms competing in? How do you know? d. Let's say that Pie Crust and Pizza joint both decide to collude and are able to do so under the C. law. What would happen with the price and quantity? e. Let's say that both firms decide to not advertise anymore and their sales are not impacted. However, their advertising costs decreases by $20. Redraw the payoff matrix showing the new profits of the business.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
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b
C
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Demand
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Free Response Question, AP Microeconomics.
1a. Steverail has a monopoly on train service between two cities. If Steverail goes unregulated by the
government what is the quantity and price that will prevail in the graph above? Explain.
b. The
vernment decides that they should regulate the monopoly and require them to set a price and
quantity that is socially optimal. What price and quantity will Steverail then be required to set? Explain.
c. What if instead, the government decided to regulate Steverail based on having a "fair return." What
would be the required price and quantity? Explain.
d. Between what two points is Steverail's demand curve inelastic? Explain.
e. What kind of tax or subsidy could the government implement to achieve a more socially optimal level
of output in this market? Explain.
Free Response Question #2.
Pie Crust and Pizza Joint are two competing businesses sell pizza and their success is based on the
other's decision. The outcomes of the two competing businesses are shown below in profit, written in
thousands of dollars. Pie Crust is at the left and Pizza Joint is at the top.
Advertise
Don't Advertise
Advertise
20, 16
19, 13
Don't Advertise
14, 18
14, 19
Based on the payoff matrix shown, what are the dominant strategies of.
a.
i.
Pie Crust?
ii.
Pizza Joint?
b. Based on the payoff matrix, what is the Nash Equilibrium that will be achieved?
C.
What kind of market structure are these two firms competing in? How do you know?
d. Let's say that Pie Crust and Pizza joint both decide to collude and are able to do so under the
law. What would happen with the price and quantity?
Let's say that both firms decide to not advertise anymore and their sales are not impacted.
However, their advertising costs decreases by $20. Redraw the payoff matrix showing the new
e.
profits of the business.
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