Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 14, Problem 10P
(a)
To determine
Profit earned by each country in different cases of quantity supplied.
(b)
To determine
Nash equilibrium for country A and country B.
(c)
To determine
Profit if both countries produce
(d)
To determine
Existence of an incentive to cheat for either country.
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Students have asked these similar questions
Two firms, A and B, are contemplating exporting a local fruit called durian to another
country that has strong demand for durian. If both firms export their durians, each firm
can earn an export revenue of $25 million. If both firms do not export, each firm can earn
a revenue of $12 million from their own domestic market. If one of them exports durians
and the other does not export, the firm that exports durians can earn an export revenue of
$50 million. But the non-exporting firm will earn a revenue of $18 million.
(a)If both firms make a decision simultaneously, construct and analyse a payoff
matrix and solve for the Nash equilibrium. Explain whether this is the prisoner’s
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(b) Suppose Firm A can make a decision before Firm B. Construct and analyse a
decision tree model and determine the payoffs to both firms. Does timing matter
in this game?
Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries
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oil, the demand curve is downward sloping.
Refer to Scenario 16-1. The fact that both countries have colluded to earn higher profit shows their desire to keep
production levels
above the monopoly level of output.
below the Nash equilibrium level of output.
equal to the Nash equilibrium level of output
above the Nash equilibrium level of output.
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many
gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want
without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:
Quantity
(in gallons)
10
|1
O b. $12
O c. $10
d. S8
2
113
14
לן
16
17
18
19
10
11
12
Price
$24
$22
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
Total Revenue
(and Total Profit)
$0
$22
$40
$54
$64
$70
$72
$70
$64
$54
$40
$22
$0
Refer to Table 17-3. Suppose the town enacts new antitrust laws that prohibit Maria and Miguel from operating as a monopoly. What will be the price of milk once Maria and Miguel reach a Nash
equilibrium?
a. $14
Chapter 14 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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