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AK_HW5

# AK_HW5 - Answer Key for Homework#5 Question 1(a...

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Answer Key for Homework #5 Question 1 (a) Microeconomics, Macroeconomics. (b) Macroeconomics. (c) (Microeconomics, Macroeconomics) and (Macroeconomics, Microeconomics). (d) Macroeconomics. (e) (Macroeconomics, Macroeconomics). No, we can reach to (10,10) payoff. (f) Yes, the dominant strategy for Prentice Hill is Macroeconomics. Yes, the domi- nant strategy for McGraw Hall is Macroeconomics. (g) Microeconomics. (h) (Microeconomics, Microeconomics) and (Macroeconomics, Macroeconomics). Yes, we can reach to (10,10) payoff at (Microeconomics, Microeconomics). (i) Yes, the dominant strategy for Prentice Hill is Microeconomics. Yes, the domi- nant strategy for McGraw Hall is Microeconomics. Question 2 (a) Action: Enter, Not. Strategy: (Enter, Enter), (Enter, Not), (Not, Enter), (Not, Not). (b) “Not” is the best response, since it gives larger payoff. (c) The (subgame perfect) Nash equilibrium is (\$400, (Enter, Not)). (d) Although Samsumg announced uncompromising entry, “Not enter” is a best interest of Samsung, once Apple takes a low price. Question 3 (a) See the Figure 1. 1

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Figure 1: Range of Optimal q H P Q 5 10 500 250 MC Demand MR (b) The profit is maximized when MC = MR . And so MC = 5 + 0
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