Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 19, Problem 5RQ
To determine
How is efficiency of catching fish is maximized.
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Suppose Ishmael and Santiago are the only two fishermen who fish in Lake Hardin. Each must choose between fishing for 20 hours per week or for 40 hours per week. If both choose to fish for 20 hours per week, then each can earn a profit of $3,000 per week. If both choose to fish for 40 hours per week, then each can earn a profit of $2,000 per week. If Santiago fishes for 40 hours per week, and Ishmael fishes for 20 hours per week, then Santiago can earn a profit of $4,000 per week, and Ishmael can earn a profit of $1,000 per week. If Ishmael fishes for 40 hours per week, and Santiago fishes for 20 hours per week, then Ishmael can earn a profit of $4,000 per week, and Santiago can earn a profit of $1,000 per week.
a. Construct the weekly payoff matrix for this situation.
Ishmael
20 Hours
40 Hours
Santiago
20 Hours
$ for Santiago$ for Ishmael
$ for Santiago$ for Ishmael
40 Hours
$ for Santiago$ for Ishmael
$ for Santiago$ for Ishmael
b. What is the equilibrium outcome…
Cooper and Rebecca run the only two lawncare companies in a small town. If they worked independently, they would each earn $3000. If they cooperated, they know they could raise the price of their lawncare services and service fewer lawns, but can each earn $4500. If one person raises prices and other does not, the person who raises prices will earn $1000 and the other will earn $6000. Draw a table representing their dilemm
Two fishermen (Andy and Bob) are fishing in the same lake. Each can either fish for 5 or 6 hours. Their payoffs depend
on how much time each of them fishes:
- If they both fish for 6 hours each, their payoff is 2 fish for Andy and 2 fish for Bob;
- if they both fish for 5 hours each, their payoff is 3 fish for Andy and 3 fish for Bob;
- if one fishes for 5 hours and the other for 6, then the payoff of the former is 1 fish and of the latter is 4 fish.
What are the payoffs at the Nash Equilibrium if they play sequentially, and Bob plays first?
(Hint: Before you choose the correct answer, write the game in a tree form and find the Nash Equilibrium)
Select one:
a. Andy gets 2 and Bob gets 2
b. Andy gets 3 and Bob gets 3
c. Andy gets 1 and Bob gets 4
d. Andy gets 4 and Bob gets 1
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