1. Sam is going to Baltimore for the day to watch his favorite baseball team (Orioles). Sam loves his Orioles, but he is addicted to drinking beer (B) and eating hotdogs (D) while watching his team. His utility function is: U = (B*D)1/2 a. Suppose Sam has $50 to spend on beer and hotdogs. Beer costs $5 a mug and a hotdog costs $4. Draw Sam's budget constraint. b. Suppose Sam spends all of his income on beer. How many mugs of beer can he buy? What is his utility? c. Will Sam's income allow him to reach a U = 5? d. If Sam buys 4 hotdogs, how many mugs of bear can he buy? What is his utility? e. What is the combination of beer and hotdogs that yield the highest utility? 2. Firm A's Price $20 $15 $20 $40 profit $35 profit Firm B's Price $37 profit $39 profit $15 $49 profit $38 profit $30 profit $35 profit a. Firms A and B are member of an oligopoly. Which solution will Firm A and B select? b. Is there a Nash equilibrium? If so, what is it? c. Which solution will Firm A and B select if Firm A moves first and Firm B moves second? d. Which solution will Firm A and B select if Firm B moves first and Firm A moves second?
1. Sam is going to Baltimore for the day to watch his favorite baseball team (Orioles). Sam loves his Orioles, but he is addicted to drinking beer (B) and eating hotdogs (D) while watching his team. His utility function is: U = (B*D)1/2 a. Suppose Sam has $50 to spend on beer and hotdogs. Beer costs $5 a mug and a hotdog costs $4. Draw Sam's budget constraint. b. Suppose Sam spends all of his income on beer. How many mugs of beer can he buy? What is his utility? c. Will Sam's income allow him to reach a U = 5? d. If Sam buys 4 hotdogs, how many mugs of bear can he buy? What is his utility? e. What is the combination of beer and hotdogs that yield the highest utility? 2. Firm A's Price $20 $15 $20 $40 profit $35 profit Firm B's Price $37 profit $39 profit $15 $49 profit $38 profit $30 profit $35 profit a. Firms A and B are member of an oligopoly. Which solution will Firm A and B select? b. Is there a Nash equilibrium? If so, what is it? c. Which solution will Firm A and B select if Firm A moves first and Firm B moves second? d. Which solution will Firm A and B select if Firm B moves first and Firm A moves second?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education