8.A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell t
ID: 1197756 • Letter: 8
Question
8.A pretzel-stand owner in Chicago hires workers to make hot pretzels and sell them to customers. If the firm is competitive in both the market for pretzels and in the market for pretzel-makers, then it has
A. no control over the price of pretzels but some control over the wage it pays to its workers.
B. some control over both the price of pretzels and the wage it pays to its workers.
C. some control over the price of pretzels but no control over the wage it pays to its workers.
D. no control over either the price of pretzels or the wage it pays to its workers.
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7.Table 17-14 This table shows a game played between two players, A and B.
The payoffs in the table are shown as (Payoff to A, Payoff to B).
Refer to Table 17-14. If both players choose their best strategies, player A will earn a payoff of
A. 4.
B. 0.
C. 6.
D. 2.
B Left Right A Up (4, 4) (6, 2) Down (2, 6) (0, 0)Explanation / Answer
8) In the competitive market for pretzels, all firms are price takers, i.e. they cannot control the market price of their product. Also, in a competitive market firms are wage takers because if they set lower wages workers would not accept the wage.
Therefore, the pretzel-stand owner has no control over either the price of pretzels or the wage it pays to its workers.
The Answer is D.
7) The best strategy of a player is one which gives him the maximum pay-off. A's maximum pay-off is 6, when it choses 'Up'. When A plays 'Up' the maximum pay-off B receives is 4, when it plays 'Left'. In this case the final pay-off will be (4,4).
Therefore, A will earn a payoff of 4.
The Answer is A.
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