Firm A currently monopolizes its market and earns profits of $10M. Firm B is a potential entrant that is thinking about entering the market. If B does not enter the market, it earns profits of $0, while A continues to earn profits of $10M. If B enters, then A must choose between accommodating entry and fighting it. If A accommodates, the A earns $5M and B earns $5M. If A fights, both lose $5M. EXTEND the above game. Now, suppose the decision of B to enter is reversible in the following way. After B enters the market, and A has decided to either fight or accommodate, B can choose to remain in the market or exit. All payoffs from the above game remain the same. However, if B decides to exit the market, then B suffers a loss of $1 M, while A regains the old profit of $10M. Draw the game in extensive form and predict the outcome.

Beta's Price Policy High Low A B $20 $30 High Alpha's Price Policy $20 $10 C D $10 $15 Low $30 $15 Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If both firms follow a high-price policy. Multiple Choice Beta will realize a $10 million profit and Alpha a $30 million profit. each will realize a $15 million profit Alpha will realize a $10 million profit and Beta a $30 million profit

MCQ 27 Consider the following game in which two firms (OLD and NEW) are considering whether or not to advertise to increase sales. Each firm knows that the impact on profits depends on what the other firm chooses to do. The possible profit outcomes of the game are shown below, with OLD's profits shown as the first number in each pair and NEW's profits shown as the second number: NEW Advertise Not Advertise Advertise 10, 5 15, 1 OLD Not Advertise 5, 8 20, 3 Assuming the firms aim to earn as much profit as possible, which of the following is TRUE for the game? A I do not want to answer this question. OLD's dominant strategy is to advertise C OLD's dominant strategy is not to advertise NEW's dominant strategy is not to advertise E NEW's dominant strategy is to advertise F the dominant strategy for both OLD and NEW is to advertise

Tying as a Bundling Strategy     Ginnie's Gym Refreshment Bar    Hydration Power Drink Satisfying Smoothie Early 7.00   5.00 Late 6.00 10.00 Ginnie has observed that her signature item, the Satisfying Smoothie, is very popular with the late evening crowd at the gym, but it is not so popular with the early crowd. The early and late crowds have only slightly different preferences for her Hydration Power Drink. The gym has a very large clientele, and Ginnie can’t always tell who has the late-crowd preference and who has the early-crowd preference. In her graduate MBA class, they have been studying tying as a bundling strategy. Ginnie asked her professor, “Would bundling work for my business?” Her professor said, “I think you told me that the marginal costs for you two products differ significantly, so first, I would recommend that you look at the contribution margin for each. Sometimes, low prices may be more profitable and sometimes high prices will be…

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…

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 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?