Principles of Microeconomics
8th Edition
ISBN: 9781337676670
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Chapter 2, Problem 4QR
To determine
Factor market and production market.
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Question 6 of 18
>
The graph shows the average total cost (ATC) curve, the
marginal cost (MC) curve, the average variable cost (AVC)
curve, and the marginal revenue (MR) curve (which is also
the market price) for a perfectly competitive firm that
produces terrible towels. Answer the three questions,
assuming that the firm is profit-maximizing and does not shut
down in the short run.
What is the firm's total revenue?
S
What is the firm's total cost?
$
What is the firm's profit? (Enter a negative number for a loss.)
$
Price
$320
$300
$200
$150
205 260
336
365
Quantity
MC
ATC
AVC
MR=P
1. Suppose that the two nations face the following benefits of pollution, B, and costs of
abatement, C: BN = 10, Bs = 7; CN = 5, Cs = 4. Further assume that if the nation chooses to
abate pollution, it still receives the benefits of pollution but now must pay the cost of
abatement as well.
a. Identify the payoffs that accrue to each nation under the four different possible
outcomes of the game and present these payoffs in the normal form of the game.
b. Recall that the term dominant strategy defines the condition that a player in a game
would prefer to play that strategy (in this case either pollute or abate) regardless of
the strategy chosen by the other player in the game. Does either nation have a
dominant strategy in this game? If so, what is it?
c. Identify the Nash equilibria, or non-cooperative equilibria, of this game.
Chapter 2 Solutions
Principles of Microeconomics
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