The above figure shows the payoffs to two firms deciding to open a gasoline station in an isolated town. If firm A decides first, what will happen? If there is a $60 fee to enter this market, what will happen?
What will be an ideal response?
If firm A decides first, it will enter. Entering is also a dominant strategy for firm B, so it will enter also. With a $60 fee, firm A still enters and earns $40. Firm B will not enter, since it will incur a $10 loss doing so.
You might also like to view...
Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________, 
A. Rising; B; C B. Falling; A; C C. Falling; A; B D. Rising; A; C
Using the GG-LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs
What will be an ideal response?
Over the long-run, fluctuations in the growth rate in output are primarily driven by fluctuations in
a. investment in capital. b. educational attainment. c. fluctuations in the labor force. d. fluctuations in labor productivity.
The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the
a. total cost curve b. short-run average total cost curve c. average variable cost curve d. long-run average cost curve e. marginal cost curve