Sample Exam 3 solutions

Sample Exam 3 solutions - Econ102: SampleExam3 1 a...

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Econ102: Principles of Microeconomics 1 Sample Exam 3 1. Consider the following information about a firm’s costs: a. Fill in the blank columns for Total Cost, Average Total Cost, and Marginal Cost. b. Sketch the firms ATC and MC curves on the same graph. Q P
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Econ102: Principles of Microeconomics 2 c. Suppose the firm operates in a perfectively competitive industry where the price is $11.50. How many units of output would the firm produce? What is the firm’s profit? What if the price falls to $9.50?
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3 2. Figure: Payoff Matrix I for Blue Spring and Purple Rain Using the payoff matrix above: a. Define dominant strategy. A strategy that is best REGARDLESS of the strategies chosen by other players. b. Define Nash equilibrium. An outcome where each player is pursuing their best strategy given the strategies followed by other individuals. c. Does Blue Spring have a dominant strategy? Does Purple Rain? Briefly Explain. d. What is the Nash Equilibrium of this game? The Nash equilibrium is where both produce such that there is a low price for the good (meaning the both produce a lot). They would be better off if they agreed to limit output in order to increase the price so that they both earn a higher profit. Although collusion is illegal in the U.S. it is still difficult to maintain even if it were
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Sample Exam 3 solutions - Econ102: SampleExam3 1 a...

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