a. Use the payoff matrix to explain the mutual interdependence that characterizes these two advertising firms.
b. Assuming no collusion between these two advertising firms, what is the likely pricing outcome? Explain.
In view of your answer to part b, explain why price collusion is mutually profitable. Why might there be a temptation to cheat on the collusive agreement? Does a Nash Equilibrium occur in this game? Explain.
For Southland, what is their best strategy or its most dominant strategy? Explain. Can a dominant strategy be a Nash Equilibrium? Explain.
Southland’s Budget $100 $120
Budget $60 $80
2. Suppose J’s is a retail outlet which sells all sorts of food items and it is a monopolistic competitive firm.
a. Draw a graph of J’s making a profit. Be sure to clearly identify the area of profit in this graph.
b. In the diagram show the profit maximizing price and output.
c. From this graph, show the area of total revenue? Total cost?
d. Is the elasticity of its demand curve more or less elastic than a monopolist?
Clearly explain your answer.
What will happen to the profits in the long-run for this monopolistic competitive firm? Explain your answer. Also draw a graph showing the end result for the long-run.
Recently Asked Questions
- an example of social behavior or a social situation that seems inconsistent with the fundamental presupposition and why it could be inconsistent?
- Please help for this question. It asks for using the pumping lemma to prove that this machine is not right. I know that we are supposed to find a loop in this
- I’m trying to understand The Crisis by Thomas Paine, but I don’t get what his purpse is. I can sense a bit that he’s trying to persuade people, but I