Problem 1 You are a monopoly, the only firm selling a product in a given market....

 

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Problem 1 You are a monopoly, the only firm selling a product in a given market. The total quantity Q that consumers would like to buy during a given time period depends on your price P in the following way P=740-80Q. Your production capacity during that period is limited to a maximum of 9 goods. Your advisors give you a table summarizing your costs, in order to help you choose the optimal price and the optimal quantity to produce: TC is your total cost incurred for producing the quantity displayed. MC is the marginal cost, that is, the additional cost incurred for producing an extra unit (for example, producing the 4th unit costs you an additional $45). Q 12345678 9 VC 0 6 27 72 150 270 441 672 972 Player 1 FC 200 200 200 200 200 200 200 Up Middle Down 200 200 TC 200 206 227 272 Left 1,2 0,4 -1.1 350 470 641 872 1172 Problem 2 Consider the following game (Player One's Payouts is the first number): Player 2 ATC 200 103 75.66 68 70 78.33 91.57 109 130.22 a. Does player 1 have a dominant strategy? Explain. b. Does player 2 have a dominated strategy? Explain. c. Solve the equilibrium for this game. Your advisors disagree on what quantity and price you should set. The first advisor says that to maximize profit, you should choose to produce 7 goods and sell each unit at $180, because 7 units is the highest quantity such that marginal cost is lower than the price at which the units can be sold. The second advisor suggests that you should select a higher price in order to increase your margin. According to you, what is the best strategy? (Obviously both advisors can be wrong). MC Middle 3,5 2,1 4,3 - 6 21 45 78 120 171 231 300 Right 2,1 3,0 0,2 Problem 1 You are a monopoly, the only firm selling a product in a given market. The total quantity Q that consumers would like to buy during a given time period depends on your price P in the following way P=740-80Q. Your production capacity during that period is limited to a maximum of 9 goods. Your advisors give you a table summarizing your costs, in order to help you choose the optimal price and the optimal quantity to produce: TC is your total cost incurred for producing the quantity displayed. MC is the marginal cost, that is, the additional cost incurred for producing an extra unit (for example, producing the 4th unit costs you an additional $45). Q 12345678 9 VC 0 6 27 72 150 270 441 672 972 Player 1 FC 200 200 200 200 200 200 200 Up Middle Down 200 200 TC 200 206 227 272 Left 1,2 0,4 -1.1 350 470 641 872 1172 Problem 2 Consider the following game (Player One's Payouts is the first number): Player 2 ATC 200 103 75.66 68 70 78.33 91.57 109 130.22 a. Does player 1 have a dominant strategy? Explain. b. Does player 2 have a dominated strategy? Explain. c. Solve the equilibrium for this game. Your advisors disagree on what quantity and price you should set. The first advisor says that to maximize profit, you should choose to produce 7 goods and sell each unit at $180, because 7 units is the highest quantity such that marginal cost is lower than the price at which the units can be sold. The second advisor suggests that you should select a higher price in order to increase your margin. According to you, what is the best strategy? (Obviously both advisors can be wrong). MC Middle 3,5 2,1 4,3 - 6 21 45 78 120 171 231 300 Right 2,1 3,0 0,2

Answer rating: 100% (QA)

Answer Inverse demand curve is as follows P 740 80Q ... View the full answer