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Exam 2 - Mock - the extensive form of this game Does the...

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ECON 425 - 100 P RACTICE Q UESTIONS FOR E XAM #2 1. Do Problems 5, 6 & 7 of Chapter 10 on page 340. 2. In some goods market, a monopoly can earn an annual profit of $50 while if there were two firms they would both enter $20 each annually. a. An incumbent firm (monopoly) has the option of helping pass legislation (assume it is helps, the legislation will pass) that makes all firms in this industry to pay the government an annual fee of $15. A possible entrant will make his entry decision after the incumbent makes his decision. Draw
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Unformatted text preview: the extensive form of this game. Does the incumbent want help pass legislation? b. Analyze the above game if the annual government fee is $25. c. What do you have to say about results of a and b. Review questions: 1. Under what conditions does a firm benefit from using noncooperative strategic behavior? 2. Should antitrust laws forbid all actions that appear to be noncooperative or cooperative strategic behavior? 3. Why do firms vertically integrate? Why might they not vertically integrate? More questions to come …...
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