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You and your rival must simultaneously decide what price to advertise in the weekly newspaper. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3. If you charge different prices, the one charging the higher price loses $5 and the one charging the lower price makes $5.
a. Find the equilibrium when there are no repeated transactions.
b. Now, suppose there are repeated transactions. If the interest rate is 10%, what will be the outcome?(Note: there is no need to work out net present value; it is just mentioned to make the exercise realistic.)
there are also more than 475 bilateral and regional trade blocs, including the North American Free Trade Agreement and the European Union, which provide special trade preferences to member nations.
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Assume that, as the chair of the Fed, you make a decision to "put policy on automatic pilot" and require that monetary policy follow an established rule.
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For each of points 'a', 'b', 'd' and 'e' on the graph, calculate the price elasticity of demand (PED) and state the nature of elasticity (e.g. perfectly inelastic) at that point.
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