(II) There is a firm with a production function q = zfz?, where a > 0.(The input prices are w1, w2.) Suppose that z2 is fixed in the short run. A.4 This firm has an average cost function that is independent of output if (a) a = 2. (b) a > 2. (c) a =1. (d) a = 1/2.\f(111) Two rms, A and B, are involved in Bertrand competition. There are 100 customers each willing to pay up to 2 for one unit of output. The rms both have marginal costs of 1. (You may assume the rms share the customers equally if they set the same price.) A16 If the rms can only adjust prices in units of one penny. then this market has the equilibrium prices (a) 1 only (b Either 1 or 1.01 ) (c) Either 1 or 1.01 or 1.02 (d) Either 1 or 1.01 or 1.02 or 1.03 A] Now suppose that the rms can adjust prices by arbitrarily small amounts, but the rms move in order, rm A sets its price then rm B set its price. 'Which of the following statements is true. (a) This game has only one Nash equilibrium. {b This game has many subgame perfect equilibria. ) (c) Firm B can force rm A to set a high initial price at some Nash equilibria. ) (d There is no Nash equilibrium because rm B's optimal response is not dened