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Suppose that the market demand for facial mud packs are given as follows: P = 2,200 – Q. Mud packs can be produced at no cost. Determine the level of output that would be produced by each firm in a Cournot duopoly in the long run. Calculate the price charged for mud packs. Show all calculations.

Suppose that the market demand for facial mud packs are given as follows: P = 2,200 – Q. Mud packs can be produced at no cost. Determine the level of output that would be produced by each firm in a Cournot duopoly in the long run. Calculate the price charged for mud packs. Show all calculations.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 1 (Chapter 12) Suppose that the market demand for facial mud packs are given as follows: P = 2,200 – Q. Mud packs can be produced at no cost. Determine the level of output that would be produced by each firm in a Cournot duopoly in the long run. Calculate the price charged for mud packs. Show all calculations. Question 2 (Chapter 13) Buy-right is a chain of grocery stores operating in small cities throughout the southwestern United States. Buy-right's major competition comes from another chain, Acme Food Stores. Both firms are currently contemplating their advertising strategy for the region. The possible outcomes are illustrated by the payoff matrix below.
Transcribed Image Text:Question 1 (Chapter 12) Suppose that the market demand for facial mud packs are given as follows: P = 2,200 – Q. Mud packs can be produced at no cost. Determine the level of output that would be produced by each firm in a Cournot duopoly in the long run. Calculate the price charged for mud packs. Show all calculations. Question 2 (Chapter 13) Buy-right is a chain of grocery stores operating in small cities throughout the southwestern United States. Buy-right's major competition comes from another chain, Acme Food Stores. Both firms are currently contemplating their advertising strategy for the region. The possible outcomes are illustrated by the payoff matrix below.
Acme Foods Don't Increase Advertising Increase Advertising Buy-right Increase Advertising Don't Increase Advertising 20, 15 35, -5 2, 30 25, 25 Entries in the payoff matrix are profits. Buy-right's profit is before the comma, Acme's is after the comma. Describe what is meant by a dominant strategy. Given the payoff matrix above, does each firm have a dominant strategy? · Under what circumstances would there be no dominant strategy for one or both 2.1 2.2 2.3 firms? Question 3 (Chapter 13) Two firms at the St. Louis airport have franchises to carry passengers to and from hotels in downtown St. Louis. These two firms, Metro Limo and United Limo, operate nine passenger vans. These duopolists cannot compete with price, but they can compete through advertising. Their payoff matrix is below: United Limo Don't Increase Advertising Increase Advertising Metro Limo Increase Advertising Don't Increase Advertising 25, 15 30,0 15, 20 40, 5 3.1 Does each firm have a dominant strategy? If so, explain what that strategy is. 3.2 What is the Nash equilibrium? Explain where the Nash equilibrium occurs in the payoff matrix.
Transcribed Image Text:Acme Foods Don't Increase Advertising Increase Advertising Buy-right Increase Advertising Don't Increase Advertising 20, 15 35, -5 2, 30 25, 25 Entries in the payoff matrix are profits. Buy-right's profit is before the comma, Acme's is after the comma. Describe what is meant by a dominant strategy. Given the payoff matrix above, does each firm have a dominant strategy? · Under what circumstances would there be no dominant strategy for one or both 2.1 2.2 2.3 firms? Question 3 (Chapter 13) Two firms at the St. Louis airport have franchises to carry passengers to and from hotels in downtown St. Louis. These two firms, Metro Limo and United Limo, operate nine passenger vans. These duopolists cannot compete with price, but they can compete through advertising. Their payoff matrix is below: United Limo Don't Increase Advertising Increase Advertising Metro Limo Increase Advertising Don't Increase Advertising 25, 15 30,0 15, 20 40, 5 3.1 Does each firm have a dominant strategy? If so, explain what that strategy is. 3.2 What is the Nash equilibrium? Explain where the Nash equilibrium occurs in the payoff matrix.
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