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Duopoly and Nash Equilibrium:
Two identical firms have MC = $3 and face a market demand function of: QD = 9 - P. there are no fixed costs.
a. Bertand: If the firms compete on the basis of (continuous) price, what is the Nash equilibrium if the game is played once? A finite number of times? Explain clearly.
b. If the Bertand game is indefinitely repeated, how can the firms sustain a cooperative Nash equilibrium? Calculate the temptation payoff and the value of δ*.
c. Stackelberg: If the firms compete on the basis of (continuous) quantity, what are the firms' reactive curve? Find the Nash equilibrium price and output and profit of the leader and the follower.
At what price will she buy four visits? Eight visits? What is the elasticity of between a price of $5 and $6 per visit? Between a price of $29 and $31?
According to the Heckscher-Ohlin theorem, is Russia capital abundant or labor abundant? Briefly explain. What is the impact of opening trade on the real wage in Russia? Briefly explain.
Consolidated Drugs, Inc. has spent $4 million developing and testing a new anti-aging drug. Management now estimates that it will cost $2 million to produce and market this new product.
Consider the table below the supply schedules for three competitive firms, each producing honey. These three firms make up the overall industry-Calculate the total industry supply at each price and fill in the table.
Shelly's preferences for consumption and leisure can be expressed as. This utility function implies that shelly's marginal utility of leisure is C-200 and her marginal utility of consumption is L-80.
Compute total revenue, marginal revenue, total cost and profit at each quantity. What quantity would a profit-maximizing publisher choose? What price would it charge?
Suppose that natural real GDP is constant. For every 1 percent increase in the rate of inflation above its expected level, firms are willing to increase real GDP by 2 percent. Draw the new short-run Phillips Curve.
In Gelate, Pennsylvania, the market for compact discs has evolved as follows. There are two firms that each use a marquee to post the price they charge for compact discs.
Would you rather earn a 4 % nomical or 4% real interest rate? Illustrate by describing the difference between nominal and real variables.
What takes palce to output, the optimal scale of a firm, and price if there is a free entry into the market.
Define and describe the difference between the absolute advantage and the comparative advantage.
Consider a product with a supply function Q 1 = β 0 + β 1 + u 1, a demand function Q d i =y 0 +u i d . Show that P i and u s d are correlated.
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