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Problem Set 4 is to be completed by 11:59 p.m. (ET) on Friday of Module/Week 8.




ECON 213;PROBLEM SET 4;Name;Problem Set 4 is to be completed by 11:59 p.m. (ET) on Friday of Module/Week 8.;1. Movies are distributed in a variety of forms, not just first run theatrical presentations.;What other ways are movies distributed? What are the different price points? Using;this information, draw a fully labeled graph of the market for movies in which the;distributor of the film price discriminates. (NOTE: This should not be perfect price;discrimination.);2. Assume the following game is played one time only. Based on the information in the;payoff matrix, PNC Bank and Citizens Bank are considering an implicit collusive;agreement on interest rates. Payoffs to the two firms are represented in terms of;profits in thousands of dollars;Citizens Bank;Collude: Raise;Rates;Collude: Raise;Rates;(900, 600);(700, 800);Defect: Keep Rates;where they are;PNC;Defect: Keep Rates;where they are;(1100, 300);(800,400);a. Does PNC have a dominant strategy? What is it? Does Citizens have a dominant;strategy? What is it?;b. Does the result of your answer change if the game is played an infinite number of;times? Why or why not. Properly use game theoretic terminology in your answer.;Page 1 of 2;ECON 213;3. What is the profit maximizing output of the monopolist shown below?;What price do they set?;What is the mark up over cost?;P r ic e;Why will this price not fall?;10;8;M C;ATC;6;D;4;M R;2;0;10;20;30;40;O u tp u t p e r d a y;50;4. Draw the cheese market for the United States showing the world price as the price for;this market. How much cheese does the U.S. import at the world price? Now assume;that the cheese lobby promotes and successfully gains a tariff on cheese. What;happens to the price paid by cheese lovers in the U.S.? How does this change the;value generated by the market? Why do you say this? Where does this appear in your;graph?;Page 2 of 2


Paper#18367 | Written in 18-Jul-2015

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