Question 5(20 marks)

question 5.1

a)Consider the game below.What are the strategies for Boeing?Does it have a dominant strategy?What are the strategies for Airbus?Does it have a dominant strategy?Does this gamehave any Nash equilibrium(s)?If the answer is yes, find all equilibriums. If the answer is no, explain why it does not exist.(4 marks)

Size of Plane Game

Boeing

Build Jumbo

Build Small

Airbus

Build Jumbo

140,150

120,100

Build Small

110,80

50,50

You answer.

b)Consider the game below.What are the strategies for Alice?Does she have a dominant strategy?What are the strategies for Nick?Does he have a dominant strategy?Does this gamehave any Nash equilibrium(s)?If the answer is yes, find all equilibriums. If the answer is no, explain why it does not exist.(4 marks)

Nick

Go to the movies

Go to the concert

Alice

Go to the movies

800,900

100,100

Go to the concert

200,200

240,300

You answer.

question 5.2

Is the following statement true or false?

"If in the perfectly competitive market all firms are identical, the price markup for each firm is zero."Explain.(3 marks)

You answer.

question 5.3

a)Using information in the following table, calculate the hourly employment rent and total employment rent.(4 marks)

Hourlywage

$45

Hourlydisutility of effort

$3

Hourly reservation wage

$20

Weekly hours of work

15

Estimated weeks of unemployment

14

You answer.

b)Do employers benefit from employment rent?Explain.(3 marks)

You answer.

question 5.4

Provide one example of the principle-agent problem.(2 marks)

You answer.