Macroeconomics: Private and Public Choice
Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
Question
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Chapter 2, Problem 14CQ

(a)

To determine

Influence of work effort when there is a link between personal output and personal reward.

(b)

To determine

Influence of random grading in studies.

(c)

To determine

Impact on study habit when examination conducted on the basis of textbook questions.

(d)

To determine

Check whether the total output of a nation will be influenced when there is a link between productive contribution of individual and their personal reward.

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Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve.   ​(Hint​: Show that learning by doing lowers its cost in the second​ period.) Part 2 Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash​ equilibrium?
Answer
M” method  Given the following model, solve by the method of “M”. (see image)
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