Microeconomics Answers

public choice theory regarding public debt

Suppose the market for cookbooks is a duopoly. The chart below shows a payoff matrix for the two cookbooks producers (2 points). 35 Producer 1’s option Producer 2’s Option Low Price Low Price High Price High Price $20 $20 $80 $1 $1 $80 $100 $100 a. What is the dominant strategy for Producer 1? Producer 2? b. What is the Nash equilibrium

 2) Suppose our duopolists face the market demand: P = 100 – 0.5 Q. The cost 

function for firm 1 is TC1 = 5q1 and for the firm 2, it is TC2 = 0.5(q2)

2. (15 marks)

Using this information find equilibrium price, quantities, and profits if:

a. Duopolists were to behave as perfectly competitive firm

using the graph expalin why elasticity of demand will be greater bewteen 15 and $9 opposed tombewtween $9 and $4. prove this is true

Question No. 6

The first principle of economics discussed in Chapter 1 is that people face tradeoffs. Use a production possibilities frontier to illustrate society’s tradeoff between a clean environment and high incomes. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop an automobile engine with almost no emissions.

Use diagrams to illustrate each of the following:

(i) the equilibrium of a consumer (consumer satisfaction or utility is

maximized) using indifference theory

(ii) how the demand curve for one product is derived for a consumer using her

indifference map.