Eco 304k FAll 2010 MT3 Pastel

# Eco 304k FAll 2010 MT3 Pastel - 1 Midterm 3 Economics...

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Midterm 3 Economics 305k-Professor Sibley December 3, 2010 PASTEL VERSION Directions 1. Put your name on the exam. 2. Do all work on the test and observe the honor code. 3. Do not open the test until told to do so. 1

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4. There are six questions, of which you must answer 5 AND ONLY 5. 1. Consider the following game. Player I can play T or B, and Player II can play L or R. In the table, the number to the left of the comma is I’s payoff and the number to the right of the comma is II’s payoff. Player II L R T (1,0) (1,1) Player I B (-1,0) (2,1) a. Does player I have a dominant strategy? Explain. b. Does Player II have a dominant strategy? Explain. c. What is the Nash equilibrium outcome of this game, if there is one? If there is no Nash equilibrium outcome, explain. 2
2. Suppose that a monopolist faces the demand curve P = 300 – 10Q and that its marginal cost is \$30. Fixed cost is \$0. a. What is the price that the monopolist will charge in order to maximize profits? Explain your answer.

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