Assume that the only two firms in the industry, Sundance Inc. and Moondance Lid., have entered a collusive agreement to reduce their advertising budgets to a minimum. The result is that they expect to make profits of $120 million each. However, if either of them cheats, the cheater will increase its profits by $35 million at a cost of $35 million to the other firm. If they both cheat, they will each reduce their profits by $5 million. Moondance 10 Stick to agreement Cheat on agreement points Cell A Cell B Stick to Moondance: Moondance: agreement Sundance: Sundance: eBook Sundance Cell c Cell D Cheat on Print Moondance: Moondance: agreement Sundance: Sundance: References a. Complete the matrix by using the table above which shows the options facing the two firms. b. Which cell will be the likely outcome? They will chose option ( (Click to select)2 The Costa Rican gimble industry consists of14 firms whose annual sales are as shown in the table below: Firm Sales (in millions) A 14 B 20 points D 11 E 15 F 4 630')\" Next eight firms (total) 9 PM a. What is the (four-) rm concentration ratio for this industry? References Four firm concentration: % b. In what type of market does the gimble industry operate? Market type: (Click to select) : 3 The table below contains some revenue and cost data for the Rising Moon T-shirt Company (quantities for packets of a dozen shirts), which is in long-term equilibrium. a. Complete the blanks in the following table. Round your answers in the "AC" column to 2 decimal places. Quantity Price TR MR TC MC AC 10 0 $ / $200 points 1 62 212 122 226 eBook 180 242 232 260 VOUT A W N Print 270 280 References 306 306 336 336 8 360 384 b. What is the profit-maximizing price and output for Rising Moon? Price: $ Output: c. At the profit-maximizing output, what are MC and MR? MC: $ MR: $62 212 122 226 3 UT A W N H 180 242 232 260 270 280 6 306 306 336 336 10 8 360 384 points b. What is the profit-maximizing price and output for Rising Moon? eBook Price: $ Print Output: References c. At the profit-maximizing output, what are MC and MR? MC: $ MR: $ d. At the profit-maximizing output, what are AC and AR? Round your AC answer to 2 decimal places. AC: $ AR: $ e. Given your answers above, what type of market must Rising Moon be operating in? Rising Moon must be operating in a ( (Click to select)Answer the following question based on the graph below, which is for Blue Smooth Yoga Mats Lid. one of 50 small firms operating in the industry. D MR 10 90 points AC 75 MC eBook Print 60 References Price, costs 45 30 15 0 250 500 750 1000 259 500 75020032502500 Quantity per period4 10 points eBook Print References \"U 500 '3\" 1000' \"\"1 500' laL2000\"\"'2500 Quantity per period a. What is the prot-maximizing output? Output: b. What price will the rm charge? Price: $ c. How much excess capacity exists at the output in (a)? Excess capacity: d. Is Blue Smooth making economic profits? (Click to select) 9 6. Is the current situation long-run equilibrium? (Click to select) 9 5 The graph below shows the demand for nectar in Gardenia. D 30 60 Q points 50 eBook 40 Print References Price 30 20 10 0 100 200 300 400 500 600 700 Quantity per period5 30 points eBook Print References Suppose that there are only two rms, Ace and Pace, producing nectar, and they decide to act as a cartel (monopoly) and share the market equally. a. What price and output will maximize theirjoint total revenue, and what amount is that? Price: $ Output: Total joint revenue: $ b. In the payoff matrix in table below, show in cell A the amount of total revenue each will receive if they stick to the agreement. Ace Keep agreement Break agreement Cell A Cell B Keep Ace: Ace: agreement Pace: Pace: Pace Cell C Ceu D Pace: Pace: c. Suppose that Ace believes that Pace will honour the agreement by maintaining his present output. However, Ace decides to cheat and increase his output by one-third. What will be Ace's and Pace's total revenues? Show Ace's and Pace's results in cell B. d. Now, assume that the positions are reversed and that Pace decides to cheat while assuming that Ace will stick to the agreement. Show Ace's and Pace's resulting revenues in cell C. e. Finally, in cell D show the total revenue of Ace and Pace that would result ifthey both cheat