20 points k mart and sears are in competition with

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1. (20 Points) K-Mart and Sears are in competition with one another. High, Medium, and Low represent the respective prices each may choose. The dollar figures represent each firm’s respective profits. Use the below game to answer the following questions: a) (3 Points) What are Sears's strategies? b) (3 Points) What is Sears best strategy if K-Mart were to charge high prices? c) (4 points) Fill in the blanks in the below sentence. For K-Mart, charging ______________ prices strictly dominates charging _______________prices. d) (10 points) What is the Nash Equilibrium of the game? What are each firm’s profits? K-Mart charges ____________ prices. Sears charges ___________ prices. K-Mart receives a profit of ____________. Sears receives a profit of ____________. 4 High Medium Low High ($20, $20 ) (-$20, $40 ) (-$20, $ 30 ) Med ($40, -$20 ) ($10, $10 ) (-$20, $20 ) Low ($30, -$20 ) ($20, -$20 ) (0, 0 ) K-Mart Sears
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2) (20 Points) The below chart shows the daily labor productivity and variable costs for the production of leather jackets. Use this information to answer the following questions: a) (2 Points) If labor is the only variable cost, what is the wage rate for each employee? Wage_________ b) (2 Points) Which worker is the most productive? Worker # ______ c) (8 Points) Fill in the table above by calculating the Marginal Product (MP) and Marginal Cost (MC) for each unit of output. d) (8 Points) If jackets sell for $75 and fixed costs are zero, how many jackets should the firm produce to maximize profits? How many workers are employed? What are the firm's profits? # Jackets __________ # Workers __________ Profits = _________ 5
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