48. Monopolistic competition is characterized by: A) free entry and exit ir the

Question

48. Monopolistic competition is characterized by: A) free entry and exit ir the long run. B) each firm producing a standardized product. C) few producers. D) barriers to entry Use the following to answer questions 49-50: Figure: Payoff Matrix for Jake and Zoe High price Low price Zoe eans $1,000 p Zoe eans $1.500 par High JakeeeJake $1.000 per week par week $200 per $800 per Jakewees price sane $1,500 49. (Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, the only producers of slushies in their tourist town. Each week, each decides whether to price high or price low for the following week. The figure shows the profit per week earned by their two firms. According to the Nash equilibrium, Jake prices and Zoe prices A) high; high B) high; low C) low; high D) low; low 50. (Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, the only producers of slushies in their tourist town. Every week, each decides whether to price high or price low for the following week. The figure shows the profit per week earned by their two firms. Suppose the firms each decide to price high initially and adopt a tit-for-tat strategy for the following weeks. After a few weeks, Jakes profit would be-- and Zoe's profit would be A) $800; $800 B) $1,000; $1,000 C) $1,500; $200 D) $200; $1,500

Explanation / Answer

48> A

This is a property for competition to have a low barrier of entry and exit.

49> d> low low

Reason

The dominant strategy for both the players is to price lower, thus in the NE, the equilibrium will be low, low.

50> b> 1000,1000

As their is a punishment strategy involved, it is best for the firm to price high.

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