ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 6
1. Question [Strictly dominant strategies]
There are I firms in an industry. Each can try to convince Congress to give
the industry a subsidy. Let hi denote the number of hours of eort put

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 9
1. Question [Price competition with differentiated products]
Consider a linear duopoly model in which two firms compete by prices. Each
firm produces a single differentiated product with ze

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 8
1. Question [Static Cournot oligopoly]
Consider a linear Cournot oligopoly model with n firms. Suppose all firms
produce a homogeneous good with the same unit cost, 0 c < 1. The inverse
dem

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 7
1. Question [Extensive form games]
Consider the following game.
Player 1
bc
L
Player 2
l
b
(u1 , u2 ) : (3, 1)
R
b
b
r
Player 2
l
b
(1, 4)
b
(2, 3)
r
b
(4, 2)
(a) How many subgames are ther

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 3
Consider a monopoly firm, the DigiMe, selling digital tricks via email, the marginal
cost of which is zero. There is no fixed cost either. Suppose that the DigiMe has
only two customers (of

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 4
1. Consider a short-run analysis of a tailor making bow ties by using cotton cloth
under the production technology, y = f (z) = 12z z 2 , where z is cotton cloth
measured in meters and y is

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 2
1. Consider a firm operating under the following cost function:
C(y) =
0
, if y = 0
,
100y + F , if y > 0
where y represents firm output, and F is the fixed cost of production. Suppose
that

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 5
1. Penny, a community-college graduate and a quasi-talented part-time actress,
is a committed expected-utility
maximizer, with the utility function of wealth
given by U (M ) = M . Pennys ac

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 1
1. Consider an economy with two price-taking economic agents, a single consumer and a single firm. In this economy, there are two goods, the leisure
of the consumer to sit back (or labor) a

ECON 203: Microeconomic Theory II
METU, Spring 2016
Problem Set 10
Question [PBE & Sequential equilibrium]
Consider the following game: each player has two actions: (L)eft and (R)ight.
Player 1
bc
L
R
Player 2
b
R
L
b
L
(u1 , u2 , u3 ) : (0, 0, 0)
Player