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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer questions in attachments. ALL QUESTIONS. thank you.

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.

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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