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Consider a market with two firms managed by Harry and Vera. Under a cartel (both firms pick the high price), each firm earns a profit of $80. Under a duopoly (both firms pick the low price), each firm earns a profit of $60. If the two firms pick different prices, the high-price firm earns a profit of $20 and the low-price firm earns a profit of $90.
a. Fill in the following payoff matrix.
b. The outcome of the pricing game is that Harry picks the price and Vera picks the price.
c. The outcome identified in part (b) is a Nash equilibrium because neither firm has an incentive to_______.
Illustrate the consumer's opportunity set in a carefully labeled diagram. Show how the consumer's opportunity set changes when the price of good X increases to $10. How does this change alter the market rate of substitution between goods X and Y
Consider a static, Arrow-Debreu economy with N=2 states. Suppose that the market is complete and let P and 1-P be the price of the two Arrow-Debreu securities, b(1)=(1, 0), and b(2)=(0, 1), respectively.
The St. Thomas Winery plans to open a new production facility in the Napa Valley of California. Based on information provided by the accounting department, the company estimates fixed costs of $250,000 per year
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a person has made an arrangement to borrow $1,000 now and another $1,000 two years hence. The entire obligation is to be repaid at the end of four years. If the projected interests rates in years one, two, three and four are 10%, 12%, 12%, and 14%..
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Compute total revenue and total profit.
You are going to buy a milling machine for your company. The company borrows money to make the purchase and the loan terms are 9% per year, compounded monthly while making quarterly payments for 10 years.
What if you know that only 50 million tickets have been sold. Explain why, if people tend to use their childrens' birthdays when selecting numbers to play on the "Pick Three" lottery, you might be better off using the last six digits of your Socia..
A California asparagus farmer is maximizing profit. The price of asparagus is $2 a box, a farm worker's wage rate is $12 an hour, and the asparagus farm employs six workers. If, when the price of asparagus increases to $3 a box,the farm hires eigh..
university bank a monopoly bans has the following items on its balance sheet, an actual reserve = 1 billion dollars, Demand deposits = 7 billion dollars, reserve requirement is =10. What is the bank's required reserve
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