Suppose market demand is p = 10 - Q. Firms have a fixed entry cost of 5 and no marginal cost. If firm A is the incumbent, can it deter the entry of its rival, firm B?
What will be an ideal response?
Firm B's reaction function is qB = 5 - (1/2)qA. The Stackelberg leader quantity is 5 and firm B will produce 2.5. Firm A's profit is 12.5. If firm A produces 6 units for example, firm B's best response is 2 units; however, it would incur a loss and not enter. Firm A's profits by preventing entry would be 24. Thus, firm A can deter entry by overproducing.
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Describe inflation targeting rule as a monetary policy. What are its benefits?
What will be an ideal response?
The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate
Given the information in the payoff matrix, the Nash equilibrium is that Bonnie ________ and Clyde ________. A) confesses; denies B) confesses; confesses C) denies; denies D) denies; confesses E) denies; either confess or denies, either outcome is consistent with the Nash equilibrium.
An external benefit is a benefit from a good or service that someone other than the ________ receives
A) seller of the good or service B) government C) foreign sector D) consumer E) market maker
Explain the difference between price cap regulation in a natural monopoly and the effect of a price ceiling in a competitive market
What will be an ideal response?