03 Jun Question Suppose a monopolist faces the following demand curve: P = 314 7Q. If the long run marginal cost of production is
Question
Suppose a monopolist faces the following demand curve:
P = 314 7Q. If the long run marginal cost of production is constant and equal to $20.
What is the monopolists profit maximizing level of output?
What price will the profit maximizing monopolist produce?
How much profit will the monopolist make if she maximizes her profit?
What would be the value of consumer surplus if the market were perfectly competitive?
What is the value of the deadweight loss when the market is a monopoly?
Suppose that two players are playing the following game. Player 1 can choose either Top or Bottom, and Player 2 can choose either Left or Right. The payoffs are given in the following table:
Player 1
Top
Bottom
Left
2
6
Player 2
Right
0
8
2
3
5
1
where the number on the left is the payoff to Player A, and the number on the right is the payoff to Player B.
Does player 1 have a dominant strategy, and if so what is it?
Does player 2 have a dominant strategy and if so what is it?
For each of the following strategy combinations, write TRUE if it is a Nash Equilibrium, and FALSE if it is not:
Top/Left
Top/Right
Bottom/Left
Bottom Right
If each player plays their maximin strategy, what payoff will each of them receive?
Now suppose the same game is played with the exception that Player 1 moves first and Player 2 moves second. Using the backward induction method discussed in class, what will be the outcome of the game? (Hint: it will be helpful to sketch the game tree.)
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