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PQ exam 4 - ECON 303 Managerial Economics Practice...

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ECON 303 - Managerial Economics Practice Questions for Exam 4 1. You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C(Q) = 20 + 5Q. a. What is the profit-maximizing output? ( Answer: 8) b. What is the profit-maximizing price? ( Answer: $45) c. What is the maximum profit? ( Answer: $300) 2. You are the manager of a monopoly that faces a demand curve described by P = 90 - 6Q. Your costs are C(Q) = 10Q + 2Q 2 . a. What is the profit-maximizing output? ( Answer: 5) b. What is the profit-maximizing price? ( Answer: $60) c. What is the maximum profit? ( Answer: $200) 3. Consider the following pay-off table for a one-shot game: Firm A ` Firm B Low Price High Price Low Price ( 2 , 2) ( 10 , -8) High Price ( -8 , 10) ( 15 , 15) a. What are the dominant strategies for Firm A and Firm B, respectively? ( Answer: Neither firm has a dominant strategy.) b. What are the Nash equilibrium strategies for this game? [ Answer: Both (low price, low price) and (high price, high price)] 4. Consider the following pay-off table for a one-shot game: Firm A ` Firm B Low Budget High Budget Low Budget ( 4 , 6) ( 5 , 12) High Budget ( 10 , 9) ( 14 , 14) a. What are the dominant strategies for Firm A and Firm B, respectively?
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