Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Chapter 20.A, Problem 1QE
Netflix and Hulu each expects profit to rise by $100,000 in the coming year. Netflix, thinking that it would like its net profit to rise by more, considers advertising during the Super Bowl. An advertisement on the Super Bowl will cost $80,000. If Netflix advertises, and Hulu does not, it expects its profit to rise by $230,000 instead of $100,000, while Hulu’s profit will rise by only $50,000. Netflix also knows that if it does not advertise, but Hulu does, its profit will rise by only $50,000 while Hulu’s profit will rise by $230,000 instead of just $100,000. If both firms advertise, their profit will rise by the same as if neither had advertised, except each will have spent $80,000 for the ad.
- a. Develop the payoff matrix for the decision facing Netflix and Hulu.
- b. Is there a dominant strategy?
- c. If so, what is it?
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Femi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi Initially produced five trucks, but then
decided to increase production to six trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order
to sell the additional fire truck; Femi must lower the price from $160,000 to $120,000 per truck. Notice that Femi gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price.
Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $120,000 rather
than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine
at $120,000.
PRICE (Thousands of dollars per fire engine)
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Chapter 20 Solutions
Microeconomics
Ch. 20.1 - Prob. 1QCh. 20.1 - Prob. 2QCh. 20.1 - Prob. 3QCh. 20.1 - Prob. 4QCh. 20.1 - Prob. 5QCh. 20.1 - Prob. 6QCh. 20.1 - Prob. 7QCh. 20.1 - Prob. 8QCh. 20.1 - Prob. 9QCh. 20.1 - Prob. 10Q
Ch. 20.A - Netflix and Hulu each expects profit to rise by...Ch. 20.A - Prob. 2QECh. 20 - Prob. 1QECh. 20 - Prob. 2QECh. 20 - Prob. 3QECh. 20 - Prob. 4QECh. 20 - Prob. 5QECh. 20 - Prob. 6QECh. 20 - Prob. 7QECh. 20 - Prob. 8QECh. 20 - Prob. 9QECh. 20 - Prob. 10QECh. 20 - Prob. 11QECh. 20 - Prob. 12QECh. 20 - Prob. 13QECh. 20 - Prob. 14QECh. 20 - Prob. 15QECh. 20 - Prob. 16QECh. 20 - Prob. 1QAPCh. 20 - Prob. 2QAPCh. 20 - Prob. 3QAPCh. 20 - Prob. 4QAPCh. 20 - Prob. 5QAPCh. 20 - Prob. 6QAPCh. 20 - Prob. 1IPCh. 20 - Prob. 2IPCh. 20 - Prob. 3IPCh. 20 - Prob. 4IPCh. 20 - Prob. 5IPCh. 20 - Prob. 6IPCh. 20 - Prob. 7IP
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