When studying GDP, we use real GDP because we need a metric that holds: O exports constant to compare GDP from one time period to the next all else constant to compare GDP from one time period to the next. O prices constant to compare GDP from one time period to the next. O output constant to compare GDP from one time period to the next.

K04

Nn3    Suppose an incumbent monopoly firm currently earns a profit of $50,000 per period. A potential entrant could enter and make a profit of $15,000 per period while also lowering the incumbent’s profit to $20,000 per period. The monopoly firm could seek to engage in predatory pricing, which would lead to both firms earning a loss of $5,000 per period. (a) Is there a Nash Equilibrium in this game? If so, what is it? (b) Discuss how this game might play out in the real world?

Give me fast

[3%] 4. Consider the two-player game shown in the table below. Player 1 chooses between four possible strategies: A, B, C and D. Player 2 can choose among three possible strategies: a, b and c. In each cell of the table, the first number is the payoff for Player 1, the second number is the payoff for Player 2. Higher numbers represent higher payoffs. Player 2 a b C A 2,-2 4,0 -6,-2 B Player 1 4,-4 3,-3 9, 1 C 2,6 -1,4 6,4 D 6,2 0,4 -9,0 (a) Simplify the game as far as possible using the iterated deletion of strictly dominated strategies. Clearly explain the steps of your reasoning. [2%] (b) Identify any pure strategy Nash equilibria of the simplified game derived in part (a). [1%] (c) Identify any mixed strategy Nash equilibria of the simplified game derived in part (a). Write down the best response function for each player. Draw these functions Page 3 of 5

2

7