Economics Questions In Tutorial Library

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TITLE: Economics Questions



1.         The two leading U.S. manufacturers of high performance radial tires must set their advertising strategies for the coming year.  Each firm has two strategies available: maintain current advertising or increase advertising by 15%.  The strategies available to the two firms, G and B, are presented in the payoff matrix below.




Firm B




Increase Adv.

Maintain Adv.

Firm G


Increase Adv.

27, 27

50, 12



Maintain Adv.

12, 50

45, 45


The entries in the individual cells are profits measured in millions of dollars.  Firm G's outcome is listed before the comma, and Firm B's outcome is listed after the comma.

a. Which oligopoly model is best suited for analyzing this decision?  Why?  (Remember it is illegal to collude in the United States.)

b. Is there a dominant strategy for each firm?  What is it? Justify your choice


2.         The following cost and demand curves represent a monopolist

a. How much profit will the monopolist earn at the profit maximizing level of output?  

b. What is the firm’s Total Revenue at the profit maximizing level of output ?

c. What is the Total Cost  at the profit maximizing level of output?

d. What is the profit / unit at the profit maximizing level of output?


3.         Suppose that the market demand for mountain spring water is given as follows:

P = 1200 - Q

Mountain spring water can be produced at no cost.

What will be the level of output and price in the long run if this industry were perfectly competitive?


4) Convenience stores with gas stations tend to sell an essentially identical variety of goods and services. Yet this is generally considered to be a monopolistically competitive industry selling differentiated products. How can this be considered a differentiated product?


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1. Finance
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3. Economics
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