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# quiz5 - Econ 1 M10 Quiz 5 Name_ Perm_ 1. There are two...

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Econ 1 M10 Quiz 5 Name_________________________ Perm____________________ 1. There are two identical firms that sell purple sugar water. The firms can either collude and both set the monopoly price of \$18, or either firm can cheat by setting a price of \$10. The firm’s payoffs can be summarized in the game matrix below, where the first entry in each cell is Firm A’s profits, and the second entry is firm B’s profits. Underline the profit corresponding to the best response for each firm, and circle the Nash equilibrium. Firm B P=\$18 P=\$10 P=\$18 Firm A \$72, \$72 \$0, \$80 P=\$10 \$80, \$0 \$40, \$40 2. The table below shows Tubby’s production of ice cream. Use this information to fill out the Marginal Product (MP), Revenue, and Value Marginal Product (VMP) columns, if Tubby’s can sell its ice cream for \$3 per tub. N (number of workers) Q (tubs of ice cream) MP Revenue VMP 0 0 1 200 2 700 3 900 4 1000 5 1050 6 1050 3. How many workers will Tubby’s want to hire if the wage is \$250 per worker? _________ Suppose there are 100 identical firms that produce grapes, each with a production

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## This note was uploaded on 08/03/2010 for the course ECON 1 taught by Professor Bergstrom during the Summer '07 term at UCSB.

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quiz5 - Econ 1 M10 Quiz 5 Name_ Perm_ 1. There are two...

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