(3) You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation: If you both work hard, you get an A, which gives you each 40 units of happiness .If only one of you works hard, you both get a B, which gives you each 30 units of happiness. .If neither of you works hard, you both get a D, which gives each of you 10 units of happiness. . Working hard costs 25 units of happiness. (a) Fill in the following payoff matrix: Your decision Work Shirk Classmate's Work decision Shirk (b) What is the likely outcome? Explain your answer. T (c) If you get this classmate as your partner on a series of projects throughout the year, rather than only once, how might that change the outcome you predicted in part (b)?Economics 302: Intermediate Microeconomics II Assignment 3 (Due in my office 3:00, Thursday March 10) 1. Consider two firms, 1 and 2, each producing an identical good simultaneously. This good has market demand given by the (inverse) demand function p = 10 - Y, where p is price, and Y = yi + 2 is market quantity. y, represents the amount produced by firm i. These firms have cost functions as follows: C, = cy, where c = c2 = 1. (60 pts) a) Solve algebraically for these firm's reaction functions, expressing each firm's optimal output level given some level of its competitor's output. b) Graph these reaction functions and show the equilibrium point. Include isoprofit contours through the equilibrium point for both firms. c) Solve algebraically for the equilibrium: Determine the equilibrium market price, as well as each firm's equilibrium quantity and profit. d) Is your answer to part c) the only equilibrium possible? Explain. 2. Take the same industry outlined in question 1 and imagine that firms choose prices rather than quantities. Consumers split themselves evenly across the firms if the firms set the same prices, otherwise all consumers shop at the lower-priced firm. Define a Nash equilibrium in prices pi and p2. Solve for the equilibrium and explain your work. (20 pts)On April 24, 232D, obtained the following information on bonds of ]hh Limited: Par value = 51,000, coupon rate 535%, maturity date = January 1, 2025, interest payment dates = January lr July 1. A Determine the number of days in accrued for this bond. B Determine the acaned interest on the bond [use 3035:] convention} C Given that the market yield on the bond on April 24, 2512!] was 4.50%, determine full {dirty} price and clean price forAElC bond on this date. D What price will the bond trade at in the market? Explain E Suppose on April 24. EDZD, you purchased this bond in the market and held this bond for exactly one year {till April 24. 2011.]. The yield on this bond on April 24, 2011. was 115% and you decided to sell the bond. Assume you face 32% marginal tax rate and that 50% of capital gains are taxable. Assume also that coupon interest payments can be reinvested at the annual yield of 3%. 1Determine your gross income and gross return from your investment. 2 Determine your net income and net return from your investment 3 Decompose your net income into its components and comment on your results as a portfolio manager. Font Select . Paragraph Styles Editing Graph the following scenario. (Hint: the graph setup in question #8 is a good framework) For a real world example, consider the market for oil. The initial supply and demand curves would be at position 1 (p1). When the suppliers decide to collaborate and supply less oil for every price, this causes a backwards shift in the supply curve, to supply curve 2. This cuts the quantity supplied from quantity 1 (q1) to quantity 2 (q2] and raises the price paid for oil along demand curve 1. We can either shift the demand curve in to curve 2, maintaining previous price levels, but decreasing consumption even more, or we can shift our demand curve out to curve 3, maintaining previous levels of consumption but raising prices. Since there is a tradeoff between having steady prices or steady consumption, the consumers have to make a decision about which is more important to them. In the short run, they will probably decide to pay the higher prices to keep consumption steady (that is, they will shift out to curve 3), but if the prices stay high for a long time, they will start finding ways to economize, (thereby shifting in to curve 2]. 10. What terms are being defined? a. Situation in which the quantity supplied exceeds the quantity demanded for a good or service; price is above equilibrium price. Additional income derived from each additional unit of goods sold. Total Variable Costs divided by quantity sold, TVC/q- Total Fixed Costs divided by quantity sold, TFC/q. To maximize utility by making the most effective use of available resources, whether they be money, goods, or other factors. Costs which do not vary with quantity produced that a firm has to pay in order to produce and sell its goods. Total revenue