Problem 1. Explain the meaning of a Nash Equilibrium when firms are competing with respect to price. Why is the equilibrium stable? Why don't the firms raise prices to the level that maximizes joint profits? Also discuss and critique what strategies firms could use to attempt to maximize profits and discuss problems associated with such strategies given the economic and legal environment.
Problem 2. Using well explained graphical and verbal analysis, describe the market structure situation confronting professional sports (baseball, football, etc.) labor negotiations and whether you could predict the outcome of those negotiations.
Problem 3. Using well developed and thoroughly explained graphical and mathematical relationships, and verbal analysis, demonstrate that a general equilibrium can be achieved under conditions of perfect competition and that under perfect competition economic welfare is maximized. Conclude your analysis by explaining how monopoly would violate the maximization of economic welfare conditions and discuss how far you believe policy should go to try to avoid monopoly and aim for perfect competition. In the answer, discuss whether or not perfect competition is desirable, even though it has the potential for attaining welfare maximization.