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Why must the probabilities of the possible outcomes of a lottery add up to 1? What is the expected value of a lottery? What is the variance?
Professor Nash announces that he will auction off a $20 bill in a competition between Jack and Jill, two students. What is the Nash equilibrium in this game?
What is the Nash equilibrium (or equilibria) of the game you constructed in part (c)?
What is a strategic move? Why must strategic moves be hard to reverse in order to have strategic value?
What are the conditions that enhance the likelihood of a cooperative outcome in a repeated prisoners' dilemma game?
What is the difference between a pure strategy and a mixed strategy? Can a game have a Nash equilibrium even though neither player has a dominated strategy?
What is the difference between a dominant strategy and a dominated strategy? Why would a player in a game be unlikely to choose a dominated strategy?
What is special about the prisoners' dilemma game? Is every game presented in this chapter a prisoners' dilemma?
Let's imagine that a local retail market is monopolistically competitive. How many firms will operate in this market at a longrun equilibrium?
What is the Bertrand equilibrium price of shoes? How many pairs of shoes are purchased? How many shoes are purchased?
United Airlines and American Airlines both fly between Chicago and San Francisco. What is the Bertrand equilibrium in this market?
When firms choose outputs, as in the Cournot model, reaction functions slope. Why do output reaction functions differ from price reaction functions in this way?
Again consider the Coke and Pepsi example discussed in the chapter. Use graphs of reaction functions to illustrate what would happen to equilibrium prices?
What is the largest fixed fee you could charge the consumer, while ensuring that she is willing to participate in this market?
How should the regulator set S and m to maximize the sum of consumer and producer surplus while allowing the firm to earn exactly zero economic profit?
A monopolist faces two market segments. What is the monopolist's profit maximizing price in each segment?
If the firm can engage in third-degree price discrimination, what price should it set on each continent to maximize its profit?
If the seller can discriminate between the two markets, what prices would she charge to each group of consumers?
What is the profit-maximizing number of passengers of each type? What is the profit-maximizing price for each type of passenger?
Why is the current allocation of seats profit maximizing? If not, would you sell more seats to business travelers or vacation travelers?
A summer theater has a capacity of 200 seats for its Saturday evening concert. What are two prices that would maximize profit for the Saturday evening concerts?
Find each firm's reaction function. Find the Cournot equilibrium quantities and the Cournot equilibrium price.
If the market demand for nuts is P = 100 - Q, find the Cournot equilibrium price and the quantity and profit level for each competitor.
What would the equilibrium price in this market be if the two firms colluded to set the monopoly price? What is the Bertrand equilibrium price in this market?
Why is it the case in a long-run monopolistically competitive equilibrium that the firm's demand curve is tangent to its average cost curve?