Lean Cuisine and Healthy Choice can charge either $4 or $2 for their microwave-ready, frozen diet foods. Using the accompanying payoff matrix, and assuming for each a pricing strategy that avoids the worst-case scenario, what price do they pick?
Answer to relevant QuestionsConstruct a payoff matrix--by picking any two firms, any set of prices, and any payoffs associated with the pricing combinations--that shows a successful tit-for-tat pricing strategy. Why would economists argue in favor of allowing monopolies and oligopolies to set their own prices undisturbed by government? What assumptions do they make concerning economies of scale? At the core of the externalities issue is the lack of clarity concerning property rights. Discuss. The market for flu shots during late fall is shown in the following table: Suppose the community derives a positive externality of $10 for every flu shot administered. What is the extent of market failure in this situation? ...Suppose Eastern European economies, following the collapse of Soviet power in Europe, begin to demand more farm goods from Canada. What impact, if any, would you expect this new demand to have on farm wage rates in Canada?
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