A country’s market for new motor vehicles is dominated completely by two firms, Fastcars Ltd and Slowcars Ltd. Market revenue is fixed at $10 billion. Each firm can choose whether to advertise. Advertising costs $1 billion for each firm that advertises. If one firm advertises and the other does not, then the firm that advertises receives 100% of market revenue and pays for its advertising. If both firms advertise, they split the market revenue 50:50 and pay for their respective advertising. If neither advertises, they split the market revenue 50:50 but without the expense of advertising. a) What strategy would you advise that Fastcars Ltd should follow? b) What would you predict will be the strategy chosen by each firm? c) Is there an outcome that would make both firms better off? In case you find that there is such an outcome, is it achievable?

Two gas stations in a rural town can engage in collusion over pricing.  Because drivers often just stop at the first station they see as they go through town, price competition is not that severe in the first place.  Assume either station can price gas at $0.30 above average total cost or $0.50 above average total cost.  If they have equal prices, they split the market.  If they have unequal prices, the lower price station gets 75% of the market (assume for simplicity no change in the size of the market; price elasticity of demand is very low for short term changes in the price of oil).a. Draw the normal form representation of this game.  Identify the key aspects of the game.b. Identify the dominant strategy, if any, for each player.c. Identify any Nash equilibria.

Two firms are engaged in duopoly competition in a market with demand Q = 120 - p and zero costs.   The reaction function for firm i given firm j's output q i = 60 - 1 2 q j .   What is the payoff to firm i if the two firms engaged in collusion to maintain monopoly output and prices. Assume that each firm gets half the monopoly profit.

Suppose two firms compete in quantities (Cournot) in a market in which demand is described by: P=260-2Q. each firm incurs no fixed cost but has a marginal cost of 20. Now imagine they collude to produce the monopoly output.   Suppose that after the cartel is established, firm 1 decides to cheat on the collusion, assuming the other firm will continue to produce its half of the monopoly output.   What will be firm 1's profit if firm 2 continues producing the monopoly outcome? a. 4500 b. 5200 c.4200 d. 4050 Should firm 2 respond and increas their quantity? Yes or No

Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market. If they both advertise, they again split the market, but profits are lower, since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. Refer to Scenario 17-3. What is PM Inc.'s dominant strategy? to advertise only if Brown Inc. does not advertise to refrain from advertising, regardless of whether Brown Inc. advertises to advertise, regardless of whether Brown Inc. advertises to advertise only if Brown Inc. advertises

16-1. Two equal sized newspaper have an overlap in circulation of 10% (10% of the subscribers subscribe to both newspaper). Advertisers are willing to pay $10 to advertise in one newspaper but only $19 to advertise in both , because they’re are unwilling to pay twice to reach the same subscribers. What’s the likely bargaining negotiation outcome if the advertisers bargain by telling each newspaper that they’re going to reach an agreement with the other newspaper so the gains to reaching agreement are only $9? Suppose the two newspaper merge. What is the likely post merger bargaining outcome?

AP CollegeBoard Test Booklet Unit 4 Problem Set Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at your final answer. Use the graph provided below to answer parts (a)-(e). Marginal Cost Average Total Cost Average Variable Cost 108 100 55 Demand 0 10 21 31 44 57 77 Quantity Marginal Revenue BigMed, a profit-maximizing firm, has a patent on a medical device, making it the only producer of that device. The graph above shows BigMed's demand, marginal revenue, average total cost, average variable cost, and marginal cost curves. (a) Calculate BigMed's total revenue if the firm produces the allocatively efficient quantity. Show your work. (b) Starting at a price of $100, if BigMed were to increase the price by 2%, will the quantity demanded decrease by more than 2%, by less…

Suppose the robot assistant market consists of two firms: MultiTech and MicroRobo. Each of the two firms must simultaneously choose to set either a high price or a low price for its robots. If both MultiTech and MicroRobo set a high price, their profits will be SEK 30 million each. Conversely, if they both set a low price, their profits will be only SEK 3 million. On the other hand, if one firm sets a high price while the other sets a low price, the high-priced firm will incur a loss of SEK 15 million, while the low-priced firm will gain a profit of SEK 90 million. Answer the following questions: a) Write the payoff matrix of this game. b) How many Nash equilibria are there? Identify each equilibrium, what is the dominant strategy? c) Suppose MultiTech has a well-known brand, therefore receiving profits 15% higher than MicroRobo in all strategies. Explain how this would affect the payoff matrix and the firms' strategies.

Two firms compete in a single market (duopoly) with demand given by QD-60-P. The two firms have identical cost functions, C(q)=2q. Suppose firm 1 chooses its output first, following by firm 2 (Stackelberg model). In this case, firm 1 produces ✓ units and firm 2 produces ✓. Firm 1 earns ✓ units. The price in the market is ✓and firm 2 earns $ $ Does firm 1 have a first-mover advantage here?

4. How does a seller in an oligopoly decide upon a sale price? 5. What are some ways in which existing firms try to prevent new suppliers from entering an oligopoly?