QUESTION 42 This prisoner\'s dilemma game shows the payofts associated with two

Question

QUESTION 42 This prisoner's dilemma game shows the payofts associated with two fims, A and B, in an oligopoly and their choices to either colude with one another or not FIRMA Produce 20m Produce 35m A: $200m profits A: $300 profits Produce 30m B: $300m profits B: $170m profits FIRM B A: $50 m profits A: $100 profits Produce 50m B: $400m profits B: $200m profits Givon the payoffs in the matrix shown, Firm B o should always choose to compete, regardless of Firm A's actions. should always choose to collude, regardless of Firm A's actions. should compete if Firm A competes and collude if Firm A colludes should compato if Firm A coludes and coludo if Fim A competes O QUESTION 43 This tablo ropresents the revenues faced by a monopolist. Price Quantity Sold Total Revenue Average Revenue Marginal Revenue $1,000 1 $900 2 $8003 $700 4 $600 5 $500 6 $400 7 1,000 1,800 2,400 $2,800 3,000 $3,000 $2,800 Uaing the information in the tablo shown, tho marginal rovanuo for the 3r unit i: S600 $100 $800 $500 QUESTION 44 This table shows price and quantity produced for a single firm in a perfectly competitive market Price Quantit 10 23 $10 24 S10 25 $10 26 Given the information in the table shown, what is the average revenue when 24 units are produced? $240 $10 $24 $2.40 QUESTION 45 This table shows the total coots for various levels of output for a firm oporating in a perfectly competitive market Quantit Price $50 $50 $50 $50 $50 $50 TC 10.00 $20.00 $27.50 $77.50 $147.50 $250.00 4. According to the table shown, when 1 unit is produced: marginal coats oxcoed marginal rovonue, and the firm should produco moro. marginal ravanuo axcoods marginal costs, and the firm should produco moro. marginal rovenuo cxceeds marginal costa, and the firm should produco less marginal oosts excced marginal rovonue, and the firm should produce less

Explanation / Answer

Answer

42) The correct answer is (a) Should Always choose to compete regardless of what Firm A does

Suppose If firm A choose compete then Firm B should choose compete because if firm A choose to compete Firm A profit is higher when he compete($200) than when he collude($170).

Suppose If firm A choose collude then Firm B should choose compete because if firm A choose to compete Firm A profit is higher when he compete($400) than when he collude($370)

Hence the correct answer is (a) Should Always choose to compete regardless of what Firm A does.

43) The correct answer is (a) $600

Marginal Revenue of 3rd Unit = Total Revenue( of 3rd Unit) - Total Revenue(of 2nd unit)

= 2400 -1800

= 600

44) The correct answer is (b) $10

Average Revenue = Price as AR = TR/Q and TR = P*Q => Average Revenue = Price

At Q = 24 Units, Price = $10.

45) The correct answer is (b) Marginal Revenue exceeds Marginal Cost and firm should Produce more

When 1 Unit is produced Marginal Cost = 20 - 10 = $10

When 1 Unit is produced Marginal Revenue = 50*1 = 50*0 = $50

Hence MR > MC

As MR > MC, Hence firm should produce more Because he can earn more profit by producing more output.

Hence The correct answer is (b) Marginal Revenue exceeds Marginal Cost and firm should Produce more

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