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Competing firms A and B are separately considering whether to invest in advertising (Ads) or not. Advertising is costly but can increase sales. The expected payoff matrix for the two firms is shown below (numbers represent millions of dollars profit). Firm B Ads No Ads Ads -20, 100 85, 65 Firm A No Ads 70, 120 90, -10 What is the Nash equilibrium for the two firms? (a) Firm A chooses Ads and Firm B chooses Ads. (b) Firm A chooses Ads and Firm B chooses No Ads. (c) Firm A chooses No Ads and Firm B chooses Ads. (d) Firm A chooses No Ads and Firm B chooses No Ads. C (e) There is no Nash equilibrium in this case. QUESTION 14 If an oligopoly is faced with a kinked demand curve which is relatively elastic above and relatively inelastic below the going price, then it will: (a) increase total revenue by setting output quantity to the level where marginal revenue equals marginal cost. (b) increase total revenue by increasing price, but lower total revenue by decreasing price. O (c) decrease total revenue by either increasing or decreasing price. O (d) increase total revenue by either increasing or decreasing price. O (e) increase total revenue by decreasing price, but lower total revenue by increasing price.The local park has a basketball court, which is free and open to anyone. Following complaints from some members of the public that they could never access the court, as it was continuously being used by others, the local city council implemented a payment scheme where the court could be hired for $15 an hour. Which of the following statements are true? 1. Prior to the fee, the basketball court was a public good. 2. Prior to the fee, the basketball court was a common good. 3. Following the fee, the basketball court became a private good. C (a) Only 1 is true. C (b) Only 2 is true. (c) Both 1 and 2 are true. C (d) Both 2 and 3 are true. O (e) All three statements are true. QUESTION 16 If the social cost of education is greater than its market cost, then: (a) a positive externality exists. (b) a negative externality exists. Cic) education should be subsidised. O (d) education is beneficial and more should be produced. O (e) answers (a), (c) and (d) are correct