Company Kappa is a profit-maximizing monopolist currently incurring economic losses.

Draw a correctly labeled graph for Company Kappa. Label the axes and:

Profit-maximizing price (PE)

Profit-maximizing quantity (QE)

Socially optimal quantity (Qso)

Why would this firm continue to operate despite its economic losses?

Shade the area of consumer surplus.

Assume this monopolist became able to perfectly price discriminate. Identify if the following would increase, decrease, or remain constant:

The firm's profit-maximizing quantity of output

Consumer surplus

Company Kappa hires in a perfectly competitive labor market. Draw a correctly labeled labor market graph, labeling the axes, equilibrium wage (We), and equilibrium quantity of labor employed (QE).

The government funds a free training program for labor. Illustrate the effect of this training program only on the graph from part (e).

Will the quantity of labor employed increase, decrease, or stay the same?

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Company Rho operates in a perfectly competitive market and is incurring economic losses.

Draw correctly labeled side-by-side graphs for the market and for Company Rho. Label the axes and:

the market price (PE) and market quantity (QE)

the firm's quantity of output (QE)

the firm's average total cost (ATC)

completely shade the area of consumer surplus in the market

What will happen to the market price and Company Rho's profits in the long run if it remains in the market? Explain.

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Question 3 (Essay Worth 5 points) (04.05 HC) Company Omicron and Company Pi are the only sellers of a good with no close substitutes. They are each considering whether to maintain or raise their prices. They project the following daily profit payoff scenarios: Company Pi Increase Price Maintain Price Company Omicron Increase Price $80, $180 $70, $280 Maintain Price $60, $80 $50, $230 a. Does Company Omicron have a dominant strategy to maintain their price, increase their price, or no dominant strategy? b. Does Company Pi have a dominant strategy to maintain their price, increase their price, or no dominant strategy? C. Assuming no cooperation, what will the profit be for each firm? d. The government offers a $30 subsidy to the firms if they do not increase their prices. Draw a new payoff matrix reflecting the subsidy. e. Assuming no cooperation, what will the profit be for each firm after the subsidy? HH 2 > Source vc