Need help with a Microeconomics test about a dominant strategy

Jan 10th, 2016
Price: $10 USD

Question description

Microeconomics test

1.  Does either firm have a dominant strategy? Does the game have a Nash equilibrium?

Firm 1

Firm 2

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2.  When a good is sold at difference customer, this is known as price discrimination. Graph the MR, MC and demand curves and show the price and quantity produced with and without price discrimination

3.  Explain why Lester Brown’s pessimistic forecast about the world economy never happened

4.  A shift in supply will impact market price more when demand is inelastic and less impact when demand is elastic. Draw this. During Songkran (Water) festival demand is more inelastic for squirt guns. But why do squirt guns cost the same today as they do during the Songkran (water) festival? Between the US and china who has comparative and absolute advantage in manufacturing squirt guns? Explain.

5.  Graph MC, AC, MR, and D and show the change in consumer and producer surplus as the market moves from perfect competition to monopoly

6.  Consider the market for toothpaste. Now imagine a new medical report comes out and proves applying toothpaste to the skin reduces waistline fat. Show on a graph the short run and long run (10 years from now) impact of this news on the price of toothpaste

7.  Does this justify government intervention to put a price ceiling on toothpaste? Show on a graph what impact such a government price ceiling would have. Who would benefit/lose from such a ceiling?

8.  What are five ways, if you were Prime Minister, you can support the free market system?

9.  Washington State (USA) has a standard pay scale for government (public) school teachers across the state. Is this fair and efficient? Discuss in terms of the supply and demand for teachers in say Seattle, Washington vs. rural towns, and speculate on the salaries of Seattle private school teachers vs. salaries of rural private school teachers.

10.  Consider a company that owns silver mines in the US, Chile and Thailand. How should it decide how much to produce at each of those mines (if any) in the next 12 months?

11.  To what extent is the used car market in Chiang Mai perfectly competitive? Answer in terms of the properties of competitive markets

12.  Imagine a situation where CNN and other news channels report on research that shows adding a cup of tomato juice to each tank of gas will increase fuel efficiency by 20%. What impact is this announcement likely to have on the price of tomato juice over the next 3 months and over the next 5 years? Explain your answers and graph.

13.  What would be the outcome of a Thai government effort to help urban consumer by imposing a retail price ceiling of 10 baht per kg of rice when the market price of Thai rice is 20 baht per kg? explain and use a graph to illustrate answer

14.  An increase in the cost of inputs (factors of production) will have what impact on the market price and quantity sold of a commodity for which demand is price elastic? Explain and use a graph to illustrate answer

15.  Consider this statement: “A profit maximizing firm in a competitive market will choose to produce an output where its marginal revenue just equals its average cost, and of course it will never produce at a marginal revenue below its average cost.” Critically evaluate this statement.

16.  Silver miners in Idaho (USA), using lots of specialized equipment produce silver that competes in the world market with silver produced in South America where labor is much cheaper. For the hundreds of profit maximizing mining firms, what does this imply about their relative marginal costs of production in Idaho and South America? Explain

17.  Big companies in downtown areas rarely open their own fitness gyms to serve to their own employees, but businesses located in remote areas often do run their own gyms. Explain why both types of businesses may well be making efficient choices and relate your answer to “economics of scope”.

18.  Use the concept of “opportunity cost” to explain why a large urban taxi company would choose not to own and operate its own auto body shop to repair damage to its cars?

19.  “with a world population now of nearly 6.5 billion and a worldwide popularity of rice as a basic food staple in Asia, Africa, and Latin America, as the world population hits over 9 billion by 2050, we seem certain to see great shortages and skyrocketing price for rice.” Now that you become an economist, evaluate this statement.

20.  Assume that John is married to Judy. Both have full time jobs and they have 3 kids at home. Judy is wonderfully skilled at cooking, dish washing, and helping kids with homework. John is an awful cook, and average dishwasher, and so-so tutor (but a great commentator on TV sports). Because Judy is so skilled, doesn’t it make sense for Judy to cook, then wash dishes, then tutor the kids (leaving John to concentrate on his sports TV commentating)?


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Jan 10th, 2016
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