(1) Refer to the below payoff matrix for the profits (in $ millions) of two firm
ID: 2444253 • Letter: #
Question
(1) Refer to the below payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?:
A) Both firm A and firm B choose the high price. B) Both firm A and firm B choose the low price. C) Firm A chooses the low price while firm B chooses the high price. D) Firm A chooses the high price while firm B chooses the low price.
(2) The short-run profit-maximizing output level for a monopolistically competitive firm is the point at which:
A) P = ATC. B) MR > ATC. C) MR > P. D) MR = MC.
(3) Use the below figure. The economic profit for this firm is:
A) the distance between T and x-axis. B) the distance between E and x-axis. C) zero. D) the distance between T and E.
(4) Because there are low barriers to entry in a monopolistically competitive market:
A) there are many firms in the industry. B) the firms are price takers. C) there is no non-price competition. D) they produce a homogeneous product.
Explanation / Answer
a) "B"
Both the firms will choose the low price and get a return of 3 each.
b) "D"
The point where MR=MC is where they maximize the profit.
c)"D"
The distance between T and E.
d) "A"
Because of low barriers, there are many firms in the industry.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.