Can I get answers about these questions?? These questions are about Chapter 16-2

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Can I get answers about these questions??

These questions are about Chapter 16-22 in Principles of Microecnomics sixth editon.

Monopolistic competition

· What makes a market monopolistically competitive?

· How do monopolistically competitive firms decide how much to produce and what price to set?

· How to monopolistically competitive firms make short-run and long-run choices?

· What is the role of advertising?

Oligopoly and Game Theory

· What is the prisoner’s dilemma and what are some applications?

· What is collusion and why is it difficult? What are some things that can make it harder or easier to collude?

· What is a dominant strategy?

· How can you find a Nash equilibrium in a game where a player has a dominant strategy?

Markets for Factors of Production

· How do profit maximizing firms decide how much of a factor of production (such as labor) to use? In other words what is the demand for factors of production?

· What changes the demand for factors of production?

· What determines the supply for labor? Supply for other factors of production?

· How are the rental prices and wages determined in a competitive market for factors of production?

Earnings and Discrimination

· What are some reasons why different people have different labor earnings?

· What are some difficulties in measuring discrimination?

· Why might firms that discriminate have difficulty competing?

· Why might a firm find it profitable to discriminate?

Income Inequality and Poverty

· What are some political philosophies regarding what the government should do to decrease poverty or income inequality?

· What are some policies that can reduce poverty? What are the strengths and weaknesses of these policies?

Consumer Choice

· What is the consumers budget constraint?

· How does a consumer choose how much of different goods to consume?

· What are the income and substitution effects?

· How does the demand curve relate to the consumer choice problem?

· How does the consumer choice problem relate to labor supply and borrowing/lending behavior?

Asymmetric Information and Healthcare

· What is moral hazard?

· What is adverse selection?

· How do these two concepts relate to the market for insurance and healthcare?

· How do insurance companies try to deal with adverse selection and moral hazard?

Explanation / Answer

1) There are six characteristics of monopolistic competition (MC):

Moreover, with product differentiation comes market control. If advertising convinces buyers that a good is different (and better) than comparable products, then a firm can charge a higher price.

5)The structure of the traditional Prisoners’ Dilemma can be generalized from its original prisoner setting. Suppose that the two players are represented by the colors, red and blue, and that each player chooses to either "Cooperate" or "Defect".

If both players cooperate, they both receive the reward, R, for cooperating. If Blue defects while Red cooperates, then Blue receives the temptation, T payoff while Red receives the "sucker's", S,payoff. Similarly, if Blue cooperates while Red defects, then Blue receives the sucker's payoff S while Red receives the temptation payoff T. If both players defect, they both receive the punishment payoff P.

This can be expressed in normal form:

and to be a prisoner's dilemma game in the strong sense, the following condition must hold for the payoffs:

T > R > P > S....

These particular examples, involving prisoners and bag switching and so forth, may seem contrived, but there are in fact many examples in human interaction as well as interactions in nature that have the same payoff matrix. The prisoner's dilemma is therefore of interest to the social sciences such as economics, politics, and sociology, as well as to the biological sciences such asethology and evolutionary biology. Many natural processes have been abstracted into models in which living beings are engaged in endless games of prisoner's dilemma. This wide applicability of the PD gives the game its substantial importance.

6)Collusion is an agreement between two or more parties, sometimes illegal and therefore secretive, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage.[citation needed] It is an agreement among firms or individuals to divide a market, set prices, limit production or limit opportunities.[1] It can involve "wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties".[2] In legal terms, all acts affected by collusion are considered void.[3]

7)In game theory, dominant strategy (commonly called simply dominance) occurs when one strategy is better than another strategy for one player, no matter how that player's opponents may play. Many simple games can be solved using dominance. The opposite, intransitivity, occurs in games where one strategy may be better or worse than another strategy for one player, depending on how the player's opponents may play.

8) If a strictly dominant strategy exists for one player in a game, that player will play that strategy in each of the game's Nash equilibria. If both players have a strictly dominant strategy, the game has only one unique Nash equilibrium. However, that Nash equilibrium is not necessarily Pareto optimal, meaning that there may be non-equilibrium outcomes of the game that would be better for both players.

9)

Land
Labor
Capital (machines, technology and even investments)

Therefore if the company is producing larger quantities, more of these factors of production may be required. This makes the company’s demand for these factors indirect. Factors of production are demanded when profits may be raised from an increase in production, but the profit maximizing point is a result of consumer demand. I think profit is the factor that weighs most heavily on the minds of the company when acquiring new factors of production. It is difficult to pin it totally on profit because the consumer demand is what drives marginal revenue which directly impacts profits.

10) The following factors determine the demand for factors of production:

– Consumer- entrepreneurs produce the products which consumers want

– Productivity

– Cost

Canonical PD payoff matrix Cooperate Defect Cooperate R, R S, T Defect T, S P, P

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