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ECON Homework Assignment on Game Theory




Question;1. In the following game with simultaneous moves, Firm 1 and Firm 2 must decide whether to advertise (Y) or not advertise (N):The NASH equilibrium of this game is(Y, Y)(Y, N)(N, Y)(N, N)1. A strategy in which a player randomizes over several available actions is calledA dominant strategyA secure strategy A mixed strategy A trigger strategy1. Consider the following game with sequential moves:In the subgame perfect NASH equilibrium of this game,Firm 1 chooses A and Firm 2 chooses XFirm 1 chooses A and Firm 2 chooses YFirm 1 chooses B and Firm 2 chooses XFirm 1 chooses B and Firm 2 chooses Y1. There are N = 3 businesses in an oligopoly industry. The businesses produce identical products and have the same marginal cost of MC = 100 dollars. If the market elasticity of demand is EM =?2, the equilibrium price in the industry is100 dollars120 dollars130 dollars150 dollars1. A monopoly has the total cost function C(q) = 150 + 10q and serves two types of customers, Type A and Type B. If the price elasticity of demand for Type A customers is EA =?3 and the price elasticity of demand for Type B customers is EB =?2, the prices which maximize the profit of the monopoly arePA = 15 and PB = 20PA = 20 and PB = 15PA = 20 and PB = 30PA = 30 and PB = 201. Assume your typical customer has the demand function q = 20? p and your marginal cost is MC = 10 dollars, as illustrated in the graph. Then, the optimal two-part pricing strategy isFixed fee = 25 dollars and Per-unit price = 15 dollarsFixed fee = 25 dollars and Per-unit price = 10 dollarsFixed fee = 50 dollars and Per-unit price = 15 dollarsFixed fee = 50 dollars and Per-unit price = 10 dollars1. The pricing strategy in which multiple units of a product are sold as a package is calledTwo-part pricingPeak-load pricingTransfer pricingBlock pricing1. An assembly-line worker is more likely to exert less effort and produce fewer units when he is paid by the hour than when he is paid based on the number of units produced. This is an illustration ofAdverse selectionMoral hazardSignalingScreening1. A business is considering an investment with uncertain outcomes. In particular, the return from the investment will be 100,000 dollars with 20% probability, 50,000 dollars with 30% probability, and 20,000 dollars with 50% probability. The expected return from the investment is20,000 dollars35,000 dollars45,000 dollars50,000 dollars1. A business in a perfectly competitive market must decide how much to produce before it knows what the market price will be. The business estimates the price will be p = 25 dollars with 25% probability, p = 20 dollars with 50% probability, and p = 15 dollars with 25% probability. If the total cost function of the business is C(q) = 500 + (1/10)q2, what quantity should be produced to maximize the expected profit of the business?+50 units75 units100 units125 units


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