ECON102 HW5

The strategy combination of Player A choosing Bottom and Player B choosing Right is a Nash Equilibrium

true

Refer to the graph again. The profit-maximizing price of haircuts by Neat and Trim is

$16

The table shows an industry with 12 firms and the market share (percentage) owned by each firm. Calculate the HHI for this industry

1,042 (with margin: 0)

If firms F and G decide to merge, what would the new HHI be?

1,138 (with margin: 0)

If firms C and D decide to merge, what would the new HHI be? (don't assume that firms F and G have merged from the previous question). The new HHI after firms C and D merge is _______?

1,330 (with margin: 0)

Enter just a number to answer this problem. What price should this firm charge if it wants to maximize its profit?

15 (with margin: 0)

Refer to the graph above, which represents the demand and cost curves for Neat and Trim Barber Shop, a monopolistically competitive firm. The profit-maximizing number of haircuts for the Barber Shop is

20

Refer to the graph. From society's point of view, the efficient output level is ______ haircuts

25

Suppose that two players are playing the following game. Player A can choose either Top or Bottom, and Player B can choose either Left or Right. The two players choose their strategies simultaneously. The payoffs are given in the table, where the number on the left is the payoff to Player A, and the number on the right is the payoff to Player B. How many possible outcomes are there in this game?

4

Enter just a number to answer this problem. How many units of output will the firm produce if maximizes its profit?

4 (with margin: 0)

What is the maximin strategy for Player B?

right

The major distinguishing characteristic of oligopoly is that

firms are interdependent

We know that monopolistically competitive firms prevent the efficient use of resources because they produce where

P > MC

Does Player A have a dominant strategy? If so, what is it?

There is no dominant strategy for Player A

Does Player B have a dominant strategy? If so, what is it?

There is no dominant strategy for Player B

Now suppose the same game is played with the exception that Player A moves first and Player B moves second. Using the backward induction method discussed in the online class notes, what will be the outcome of the game? Hint: Draw the game tree associated with this situation.

Player A chooses Bottom and Player B chooses Right

Which of the following is true about antitrust law?

The Clayton act makes specific rules about economic actions being illegal if they result in a greatly reduced amount of competition

The strategy combination of Player A choosing Bottom and Player B choosing Left is a Nash Equilibrium

false

The strategy combination of Player A choosing Top and Player B choosing Right is a Nash Equilibrium

false

Suppose that a monopolistically competitive firm must build a production facility in order to produce a product. The fixed cost of this facility is FC = $24. Also, the firm has constant marginal cost, MC = $3. Demand for the product that the firm produces is given by P = 27-3Q

answers written down **

For a monopolistically competitive firm in long-run equilibrium,

at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve.

Of the following, ________ is the best example of an oligopolistic industry

automobiles production

Oligopolists must ________ to their strategy in order to determine their optimal strategy

both A and B are correct A - anticipate the reaction of their customers B - anticipate the reaction of their rivals

If firms C and D decide to merge. This merger would be ________ by the FTC because _______.

challenged, the merger would increase HHI by more than 100

The ________ is the share of industry output in sales or employment accounted for by the top firms in an industry

concentration ratio

If Neat and Trim maximizes profits, it ________ of $80

earns a profit

Firms will ________ a monopolistically competitive market until ________ are eliminated

enter; profits

Refer to the graph again. Suppose that the profits or losses incurred by Neat and Trim are a reflection of the Barber Shop industry as a whole. In the Barber Shop industry, in the long run,

firms will enter until all firms earn zero economic profit

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

long‐run equilibrium

The demand facing a monopolistically competitive firm is ________ a monopoly firm and ________ a perfectly competitive firm.

more elastic than; less elastic than

If firms in a monopolistically competitive industry are earning economic profits, then in the long run

new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated.

The four largest firms account for approximately 90% of U.S. beer sales. The U.S. beer industry would be best classified as a(n)

oligopoly

When monopolistically competitive firms earn ________ economic profits, other firms ________ an industry in the long run

positive; enter

What is the maximin strategy for Player A?

top

If Neat and Trim maximizes profits, its ________ is $240

total cost

If Neat and Trim maximizes profits, its ________ equals $320

total revenue

The following four questions are True/False. The strategy combination of Player A choosing Top and Player B choosing Left is a Nash Equilibrium

true