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Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smart phones: Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High Low Flashfone Pricing High 11, 11 2, 18 Low 18, 2 10, 10 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses a price. If Pictech prices high, Flashfone will make more profit if it chooses a price, and if Pictech prices low, Flashfone will make more profit if it chooses a price. Considering all of the information given, pricing low a dominant strategy for both Flashfone and Pictech. If the firms do not collude, what strategies will they end up choosing? Flashfone will choose a low price and Pictech will choose a high price. Both Flashfone and Pictech will choose a low price.
Flashfone will choose a high price and Pictech will choose a low price. Both Flashfone and Pictech will choose a high price. True or False
The game between Flashfone and Pictech is not an example of the prisoners' dilemma. True False
A U.S.-owned automobile factory uses $50 million worth of materials produced in the U.S. and $10 million worth of material purchased from foreign countries to produce $100 million of automobiles. $70 million worth of these automobiles are purchased b..
You're the manager of xyz inc. also must decide Elucidate how much output to maximize your firm's profit.
A community ponders implementing a no-smoking ordinance that would eliminate smoking in all businesses, government offices, and public places. Smokers are upset and argue that their rights are being violated by this proposed ordinance. How does the r..
It is relatively clear why price discrimination may be good for firms. But what about consumers? Do you think consumers benefit or are hurt when the firm is able to charge a different price to different customers?
Consider a transaction between two market participants. Suppose Wendy is a buyer who is willing to pay as much as $50 for a concert ticket. Suppose Bruce has a ticket and would like to receive $25 if he decides to sell it. Assuming the market price f..
Suppose that the US current account deficit must be reduced. Explain in terms of CA ≈ (S – I) + (T – G) what must be done to reduce the current account deficit. Why will this be difficult? (Hint: It may be helpful to think about the household that ha..
Help wanted advertising is higher than usual also the consumer price index is up more than expected.Inflation has slowed markedly also the Dow Jones average is at record levels.
“A producer who is attempting to maximize wealth (or profit) will never knowingly set their output where the demand for their product is ‘inelastic.’” Refute or prove this statement. Does your answer depend on whether the producer is a price taker or..
Because increased government spending or tax cuts cause higher government deficits, they also contribute to a rise in total planned expenditures and aggregate demand. Previously, the government operated with a balanced budget; however, recently, ther..
Suppose that manna from heaven falls faster and there is a one-time permanent increase in the rate of technological progress, so g rises to g’. What does this imply for the growth rate of output per worker over time? Explain in analytical and graphic..
Draw, on a large graph, a market for apartments in equilibrium, and then apply a binding rent control. Explain and indicate how the relevant economic agents are affected by the application of this price control, and why economists say rent control is..
Explain two elastic and inelastic goods that you have recently purchased/not purchased when the price increased of those products. Please relate your answer to the market characteristics.
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