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Assume that two interior design companies, Alistair and Baine, are competing for customers and, if they both advertise, they would each earn $30 million in profits. If neither advertises, they each earn $50 million in profits. If one advertises and the other doesn't, the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
1. Present the information above in the form of a payoff matrix. Let Baine be the row player and Alistair the column player. No words are required only payoff matrix
2. Define Nash equilibrium. What is (are) the Nash equilibrium(s) in this game. Explain.
3. Define dominant strategy. Is there a dominant strategy for Baine and, if so, what is it? Explain.
Economists believe that the current values of the deposit multiplier and the money multiplier are widely divergent. Why might these values differ at present? What (if anything) do you think must happen for them to converge once again?
Bill gets utility from consuming food (F) and clothing (C) represented by the following utility function: U(F,C) = FC + F. The price of food is $1 per unit and the price of clothing is $2 per unit. Bill’s income is $22. Graph Bill’s budget constraint..
Derive and plot Hugo"s Engel curve for donuts. Explain how much does his weekly budget have to rise for Hugo to buy one more donut per week.
Why is it important that each organisation develop, as part of their strategic planning process, a risk management policy and plan.
If the banking system has a required reserve ratio of 25%, then the money multiplier is. If Bank A receives a $20,000 deposit and the reserve requirement is 25%, how much does Bank A have available to loan out?
Elucidate how an increased federal budget deficit resulting from a recession can actually help stabilize an economy.
The government wants to make Medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing Medicare budget. Applying the concepts of diminishing marginal utility, the budget cuts should be made for spendi..
John spends $I on bottled water which he can buy in two sizes: 0.75 liter and 2 liter. The water is identical in the two sizes and John gets no utility from the containers themselves, only from the water. Write down a utility function for John in ter..
How to interpret estimated coefficient and How to count tendency ratio between one category of certain independent to or category.
Assume re is a multiplier effect and that total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to left or right by how much.
Aztec Enterprises depends heavily on advertising to sell it's products. Management at Aztec is allowed to spend $2 million monthly on advertising, but no more than this amount. Each month, Aztec spends exactly $2 million on advertising. What is Aztec..
Recently there has be a drive to increase the production of alternative fuels from corn. The argument used by many is energy self sufficiency. In light of the desire to reduce our use of foreign produced oil, many have suggested we should subsidize t..
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