Suppose the table below represents the payoffmatrix for two noncooperative firms in duopoly.Which of the following describes the outcomein this market?Firm A AdvertiseFirm ANoAdvertisingLow profitLossFirm BAdvertiseLow profitHigh profitFirm BNo AdvertisingHigh profitLossModerate profitModerate profitThe firms will reach an outcome that is preferableto the outcome they would achieve throughcooperation.O If both firms follow their dominant strategy eachwill reach the highest possible profit.New firms will enter this market to takeadvantage of the opportunity for above-normalprofit.O At the Nash equilibrium both firms will earn lowprofit.

In game theory, a Nash equilibrium is a situation in which no player has an incentive to change…

Suppose the table below represents the payoff matrix for two noncooperative firms in duopoly. Which of the following describes the outcome in this market? Firm A Advertise Firm A No Advertising Low profit Loss Firm B Advertise Low profit Firm B No Advertising High profit Loss Moderate profit

Suppose the table below represents the payoff matrix for two noncooperative firms in duopoly. Which of the following describes the outcome in this market? Firm A Advertise Firm A No Advertising Low profit Loss Firm B Advertise Low profit Firm B No Advertising High profit Loss Moderate profit

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the model of oligopoly, there: are many firms producing undifferentiated products. is one firm producing a highly differentiated product. is one firm producing undifferentiated products. are a few firms producing differentiated or undifferentiated products. are many firms producing differentiated products.
Consider a Stackelberg duopoly:There are two firms in an industry with demand Q = 1 − Pd.The “leader” chooses a quantity qL to produce. The “follower” observes qL and chooses a quantity qF.Suppose now that the cost function is Ci(qi) = qi2 for i = L, F. (a) Find the subgame perfect equilibrium. (b) Compare the equilibrium you found with the Nash equilibrium if the game was simultaneous (i.e., Cournot competition). Is the Nash equilibrium of the Cournot game also a Nash equilibrium of the sequential game? Why or why not?
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Deviating from the collusive outcome Please check the image there is a graph Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of beer is constant and equals $0.60 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. When they act as a profit-maximizing cartel, each company will produce cans $ and charge $ per can. Given this information, each firm earns a daily profit of $ , so the daily total industry…