EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 12, Problem 12.3P
To determine
To Compute: the Nash
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Suppose the Boston to Philadelphia airline route is serviced by three airlines – US Airways (Firm A) and JetBlue (Firm B) and Continental (Firm C). The demand for airline travel between these two cities is Q = 150 – p. The cost function is C(Q) = 30Q. The cost function is the same for all three airlines.
Assume that the three airlines are making investments in airline capacity. In other words, they are simultaneously choosing quantity. (Cournot Competition)
Derive US Airways’ residual demand function given JetBlue’s output, qB, and Continental’s output, qC.
What is the Marginal Revenue for US Airways?
Derive US Airways reaction function
Derive the market equilibrium quantity, Q*, price, p*, and Profit.
Consider trade relations between the United States and Mexico. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are shown in the image attached.
a) What is the dominant strategy for the United States? For Mexico? Explain.
b) Define Nash equilibrium. What is the Nash equilibrium for trade policy?
c) In 1993, the U.S. Congress ratified the North American Free Trade Agreement, in which the United States and Mexico agreed to reduce trade barriers simultaneously. Do the perceived payoffs shown here justify this approach to trade policy? Explain.
The correct solutions are posted with the questions. Please show work for the answers listed
Frankie and Johnny own competing motorcycle shops. They face a demand curve P = 200 – 3Q, where Q is the total number of motorcycles produced by both Frankie and Johnny. Each shop faces a marginal cost of production of 20.
A) If Frankie and Johnny must decide their production levels at the same time, what is the Nash equilibrium level of production for each shop? Answer: q*= 20
B) Suppose Frankie gets to make his production decision first. What is the Nash equilibrium level of production for each firm? Answer: Frankie: 30 and Johnny:15
C) How much would Johnny be willing to pay to keep Frankie from making his decision first?
Answer: $525
Chapter 12 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 12.2 - Prob. 1TTACh. 12.2 - Prob. 2TTACh. 12.2 - Prob. 1MQCh. 12.2 - Prob. 2MQCh. 12.2 - Prob. 1.1TTACh. 12.2 - Prob. 2.1TTACh. 12.2 - Prob. 1.1MQCh. 12.3 - Prob. 1MQCh. 12.3 - Prob. 2MQCh. 12.3 - Prob. 1TTA
Ch. 12.3 - Prob. 2TTACh. 12.3 - Prob. 1.1MQCh. 12.3 - Prob. 2.1MQCh. 12.3 - Prob. 1.1TTACh. 12.3 - Prob. 2.1TTACh. 12.4 - Prob. 1TTACh. 12.4 - Prob. 2TTACh. 12.5 - Prob. 1MQCh. 12.5 - Prob. 2MQCh. 12.5 - Prob. 1TTACh. 12.5 - Prob. 2TTACh. 12.6 - Prob. 1MQCh. 12.6 - Prob. 2MQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQCh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10P
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