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Unformatted text preview: barley both sell for $1, and income is $20, calculate demand elasticity for wheat. 6) Suppose the demand for pizza in a small isolated town is p = 10 Q. There are only two firms, A and B, and each has a cost function TC = 2 + q. Determine the Cournot equilibrium. Determine the equilibrium quantities of each if firm A is the Stackelberg leader. 7) Suppose two firms, A and B, are simultaneously considering entry into a new market. If neither enters, both earn zero. If both enter, they both lose 100. If one firm enters, it gains 50 while the other earns zero. Set up the payoff matrix for this game and determine if any pure Nash equilibria exist. Can you predict the outcome? Figure 2 8) Figure 2 shows the payoff for two firms, A and B, that must each choose to produce either an advanced computer or a basic computer. Determine the dominant strategies for each firm (if any) and the Nash equilibria (if any)....
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This test prep was uploaded on 03/25/2008 for the course ECON 425 taught by Professor Watugala during the Summer '06 term at Texas A&M.
 Summer '06
 Watugala

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