Isolated Island has two taxi companies, one owned by Ann and the other owned by Zack. Figure 18.3 shows the market demand curve for taxi rides, D, and the average total cost curve of one of the firms, ATC.Suppose that Ann and Zack have two strategies: collude, fix the monopoly price, and limit the number of rides or break the collusion, cut the price, and produce more rides. Create a payoff matrix for the game that Ann and Zack play, and find the Nash equilibrium for this game if it is played just once. Do the people of Isolated Island get the efficient quantity of taxi rides?

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FIGURE 18.3 Chapter Checkpoint Study Plan Problems 3 to 5 Price and cost (dollars per ride) 35 30 25 20 15 10 5 сл MC.... : ATC. 05 10 15 20 25 30 35 40 45 D Quantity (taxi rides per day)