Assume that a monopolistically competitive firm faces the following situation: P
ID: 1124261 • Letter: A
Question
Assume that a monopolistically competitive firm faces the following situation: P = $14, output = 9,000 units, MC = $11, ATC = $16, AVC = $7, and MR = $11. Which statement is correct regarding profit maximization?
The firm is maximizing profits.
The firm would minimize its losses if it shut down in the short run.
The firm is minimizing its losses.
The firm would minimize its losses if it decreased output.
In which situation can a Prisoner's Dilemma outcome MOST likely be avoided?
if the game is repeated over and over under the same conditions
if the players involved choose not to cooperate with one another
if each player plays his best-response strategy
if the game is only played once with no opportunity for retaliation
(Table) The game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics) indicates that:Barbara has a dominant strategy to earn profits, but Helen does not. Helen has a dominant strategy to earn profits, but Barbara does not. Both Barbara and Helen have dominant strategies to earn profits. Neither Barbara nor Helen has dominant strategies to earn profits.
Assume that a monopolistically competitive firm faces the following situation: P = $14, output = 9,000 units, MC = $11, ATC = $16, AVC = $7, and MR = $11. Which statement is correct regarding profit maximization?
The firm is maximizing profits.
The firm would minimize its losses if it shut down in the short run.
The firm is minimizing its losses.
The firm would minimize its losses if it decreased output.
In which situation can a Prisoner's Dilemma outcome MOST likely be avoided?
if the game is repeated over and over under the same conditions
if the players involved choose not to cooperate with one another
if each player plays his best-response strategy
if the game is only played once with no opportunity for retaliation
Explanation / Answer
1) Both Barbara and Helen have dominant strategies : Charge low price (this strategy helps both to earn higher payoffs no matter what strategy the other person chooses)
2) MR = MC , therefore, profit is being maximized/ loss is being minimized and because P < ATC:
The firm is minimizing its losses.
3)
Prisoner's dilemma would be avoided when:
- if the game is repeated over and over under the same conditions
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