Please finish carefully, I will give u a thumb up, Thanks! Firm A cuts 6, 6 24,0
ID: 1173599 • Letter: P
Question
Please finish carefully, I will give u a thumb up, Thanks!
Firm A cuts 6, 6 24,0 Firm A colludes 0, 24 12, 12 The possible options are to retain the collusive price (collude) or to lower the price in an attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year What is the Nash equilibrium for this game? Select one a. both firms cut prices b. A cuts and B colludes c. B cuts and A colludes d. both firms collude You are negotiating with your florist over the price of flowers for your wedding. You value the floral arrangements at $500. The florist's cost for the arrangement is $200. You finally settle on a price of $250. At your negotiated price, your consumer surplus is Select one: a. $50. b. $200 C. $250 d. $300 Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs Firm B low output Firm B - high output Firm A low output 300, 250 200, 100 Firm A - high output 200, 75 75, 100 What are the dominant strategies in this game? Select one: a. Both firms produce low levels of output. b. Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy c. Firm B's dominant strategy is to produce low levels of output, but Firm A does not have a dominant strategy d. Neither firm has a dominant strategyExplanation / Answer
a) the Nash Equilibrium will be "A", both the firm cut price. Form that point if any firm tries to collude unilaterally it will face a loss so they will remain at the point. Nash equilibrium is a point where any firm will not deviate unilaterally or they will face a loss.
b) "C"
COnsumer surplus is the difference between the expected price and the actual price. the difference here is $250.
c) "B"
The dominant strategy is a strategy which the firm will follow no matter what the other firm does i.e. the payoff of the firm will remain high no matter what strategy the other firm follows. Here, Firm A will choose to produce a low output his output will be 300 and 250 which is high compared to producing a high output and irrelevant to the fact what the other firm produce.