PS 6 answers - Shilpita Chattopadhyay April 28, 2009 PAM...

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Shilpita Chattopadhyay April 28, 2009 PAM 2000 - Problem Set 6 True/False/uncertain 1. True: This is because firms can punish each other from deviating from the strategy as  well as from future rounds.  2. True: A multimarket-price-discriminating monopoly operates by a price-setting rule in  which its MR for each group equals its MC. Since marginal revenue is a function of price  and price elasticity of demand, firms that practice multimarket price discrimination set  prices according to elasticities of demand. The consumer group that has more inelastic  demand will be willing to pay a higher price for the product anyway, so the firm can set a  lower price for the more elastic consumer group to increase profit. 3. False: If two firms form a cartel, total output is relatively low, price is high, consumer  surplus and welfare are low, and deadweight loss is high. The Cournot duopoly 
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PS 6 answers - Shilpita Chattopadhyay April 28, 2009 PAM...

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