Practice 3(both) - 4. There are six questions, of which you...

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Unformatted text preview: 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 11 can play L or R. In the table, the number to the left of the comma is 1’3 payoff and the number to the right of the comma is H’s payoff. Player 11 L T (1,0) Player I 3 (-L0) a. Does player I have a dominant strategy? Explain. W , 13¢ Era”; L, NW loat' ("1L EMS} {a J I5 b. Does Player H have a dominant strategy? Explain. HA2, .L'" a .‘5 Ir; bcrl‘ NM cake Tm B. c. What is the Nash equilibrium outcome of this game, if there is one? If there is no Nash equilibrium outcome, explain. (3 E) If; A Mask EfiUa"[:'lari‘unu, a lu— (was! (1‘) LP :1: &CU|‘¢+CQ Gwyn 8 *0 l‘ i 2 rut lu. Logcsf. ‘ r—a dwgal‘fi jcrwl s (M wt ‘9’ ‘1'» . ml. -: (“Ml FCl {K} [Mg 3 :‘7 a; 2. Suppose that a monopolist faces the demand curve P = 300 — lOQ 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. MQZLQ MB: 330 “w? “.2. MC, 3'30 Evewlcfiébfl 3-0 170:2“? 150—:sz =3;%=-IZF *‘ .— amt?!" q '2 (“it”)? H fl 0%,} 5' _ 30 p” 3‘90 f _ 165'" b. In a diagram, Show total surplus and deadweight loss at the profit- maximizing price for the monopolist. Label clearly. w ' "W I {a {31 f g c. The monopolist’s fixed cost rises fifom $0 to $50. What IS the effect on the ,. monopolist’s price? Explain. / mm. F}er (967% W» Tic-:2» C’QfF 7 fit, 3. Explain what rent-seeking behavior is and give three examples. Way-a (A MW‘I'W rum-Sir}; P9; ,_ #— ‘ W @5113) “Wkfi red/Q resawwgcci. i of. 4. Suppose that the doodad industry consists Grier firms with the following market shares. Firm 1: 40 percent Firm 2: 30 percent Firm 3: 20 percent Firm 4: 5 percent Firm 5: 5 percent a. Suppose that Firms 1 and 2 wanted to mergef Would the DO} likely oppose the merger? Explain. 2_ 1 2_ Li "L - HHI pwcmevge/t“ Ltd +3o WU +3 +5 2. [(900 + Glam Hem “firm? ‘7 Mn) NHL" page MW r. are HO) + L077; .5 H“ T : Uta-1m» +r+m> +1f+vf=53323 b. Suppose that Firms 4 and % wanted to merge. Would the DOJ liker oppose the merger? Explain 5. Consider the following game. Either player can set a high price, PPL or a low price, PL. Depending on what prices are set, payoffs are given by the table below. In the table, the number to the lefl of the comma is 1’5 payoff and the number to the right of the comma is H‘s payoff. Player 11 PH PL PH @x) (0,7) '3 . PL (7,0) ) 3. Explain why (PL, PL) are the Nash equilibrium actions. sew car (a, m. MW 5:;de 2 we“. ca 5w; Pm» a may ‘3‘" ' b. If this game were played over and over again for 50 repetitions, would you expect the outcomes to be (PLjPL) each time? Explain why or why not. You woe-rch C)? Pecj‘ f9 56’ch @H‘PED o m l—l‘W 'r-P (3(a’lms € bu, ’H‘l’ 9W “M 5+P°hfll 6. In antitrust law, explain the difference between the per se rule and the rule of reason. Also explain in which circumstances the per se mic is applied. Wage“ MM) W N per LL W (C afiwcté MIL) .‘K 5309f” CL CSLGVMM AC1) ant—3‘0. g:th CW ‘ If MEWS ‘ILLa/"C‘ afiheemwf H £"X Puff“ 1‘5 I'H'QSGA; Wkexh’V/k m fiw+var~vs+ {aw H Lake/I’Lka Mr m Wsm a ma rm‘sem 1. What are the economic costs of monopoly? (. f5 Dmdwcfikfi tau-0.553 FH?_ ‘ ha (22496.96 {oMf€>+a'H w: Fressafl— 2' n “ pe¢um wfifi C X'w-g‘mef-ffci‘cmv +ih 42 m ago—Trams e4 spew-9"“? g’y L. «LU (5V 3. {wwwwé (Ude - m uhdfwe’.“9d wyrdg @# ~M dammfif :1: L Nd. flu W fixawrc‘“ “2 M“? g : :gmf—v‘ic-e’riétw‘fi ‘-V‘VC3(V€ deatvudcfla 5 “ii—k back J'F‘ ‘ «cl/n mem+ bfikfiwhw 2. Suppose that a monopolist faces a demand curve given by P : 400 — 5Q and that the monopolist’s marginal costs is $50. a. What is the profit-maximizing output for the monopolist? MQwH-ammtOtfi. e- Ma“: 62 353:3 W [O 3”?) rMun. ‘33 we *0: b. Draw a diagram showing total surplus and deadweight loss, given your answer to a. Label clearly. 0. Suppose that the monopolist has a fixed cost of $100. What is the effect of this on its rofit-maximizin out ut? P g p M (1. Calculate deadweight loss at the monopolist’s profit-maximizing output. Fs'rg‘i we CniOuiaI-L 'l’TM Wpfi+t’:t:t. OUTPW‘ PM“ P“ M‘- LEGO" Ge—so atomPr Lt‘Q—«S‘o 1 3&19'191 s" “E: L - vs MAC-95- VNJ arul’lnmet‘xo 3. Consider the following game. Player I can play either T or B and Player II can play L or R. In the table, the number to the lefi of the comma is Player I’s payoff and the number to the right of the comma is Player 11’ s payoff. Player II L R T ( 5,5) (1,8) Player I B (8,1) (2,2) a. Can (T,L) be a Nash equilibrium of this game? Explain. No. Mow mi E New C 1-1- gm; 3 5'1 Sw’bh/M‘Ef h; (2' b. Do either of these players have dominant strategies? If so, what are they? Explain. Flam—u. LC: E 75 Lefiwg Z , Lake/[14.4 I31 [0(ch 1..— o'r‘ 9- 50 [2. I? or domi‘ham' SI—PGLI'Bg‘L, En. l, )2 been L, [4.2% 1: £034- He—u. {a r; a domFosV‘I“ {I‘mth 0. What is the Nash equ' ibrium outcome (or outcomes, if more than one)? ‘ 81(2) 1‘; A Mask 67 u: 1; Lh‘um camel ML Cs www- d. Could (T,R) be Nash equilibrium outcome? Explain. M__ J: {'0de SuJI‘WS‘JCRJv-x T HQ. 4. If the demand curve facing a monopolist is P = 300 # 35Q, What is the marginal revenue curve? Mia: 300 "‘ 5. Suppose that an industry has 20 firms of equal size. Based on the Justice Department‘s merger guidelines, would the government be likely to challenge a merger between two of these firms? Explain. 20 gin-m5 a; ear.ng Sign :7 SAW (£25 {Le/\avu—zf‘ {ac/€- 2. 2—6) 1+ H-J': t“ 70" (We ‘2 -— n god T: LO )‘1 '2 2,0 KLh '— . Suppose that chip manufacturers are charged with price fixing by the D0]. a. Under what law would they be charged? ( 0+ m {LCF‘MAM AWL SC Lied“ b. Assume that there was an agreement to fix prices, but that widespread cheating prevented prices from rising as a result of the agreement. Does the failure to actually make prices rise mean that the defendant firms are not guilty? Explain. 4‘ n “a 619W 5 AW 7,! 1 “a; An'n N fiijfii’i _ OLPHB’B Economics 304k: White Midterm 2 November 2, 2011 Professor Sibley ' ,V 17 c7. 10! 3 a; U “a 7/9 if {’1 6 3%” /__. if Directions: 1. Observe the Honor Code 2. Do not open the test until toid to do so. 3. Do any 5 questions. YOU MUST D0 QUESTION 3!!! @mofl Bee! 7 Ebononfics304k:VVhfiebdkfiefinJZ ’i:>7ztf7 ngg'S November 2, 2011 ‘ fl Professor Sibley flov 2/ K Mgwc - M a! 0‘ i 4? L '60 5 (E; «Mew XA “’1’ 7/0 ’ W '“’ w ' i Laffcefiafi Kiwaa (AW W- Pa+ef§ WM ‘“ @ be; 1. Observe the Honor Code 2. Do not open the test until told to do so. 3. Do any 5 questions. YOU MUST D0 QUESTION 3!!! ...
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Practice 3(both) - 4. There are six questions, of which you...

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