QUESTION 1 Mars bars and Snickers bars are close substitutes. Let's assume we can analyse the markets for these products using the demand-supply cross model. What would happen to the equilibrium price and quantity of Mars bars if the following events occurred simultaneously: (i) new management strategies are implemented in Mars bar factories which increase productivity and (ii) it is discovered that the peanuts in Snickers bars causes brain damage. The quantity will tend to rise and the price will tend to fall The quantity will tend to rise but the price could rise or fall The quantity will tend to fall and the price will tend to rise The quantity could rise or fall and the price could rise or fall The quantity and price rotate around a fixed point in space. The quantity will tend to rise and the price will tend to remain unchangedQUESTION 2 Examine the following graph. Assuming this firm's goal is to maximise connomic profit and the firm is uninhibited by goverment Interventions, how much coonomic profit would it make? Price [$) 10 MC AC HNW MR AR=D 1 2 3 4 5 6 9 10 Quantity O $12QUESTION 3 Tarek and Stefan are friends who are discussing what movie to see together. Tarek loves romantic comedies and Stefan prefers horror movies. The matrix immediately below shows the utility payoffs for the various combinations of strategies that could be chosen. Stefan RomCom Horror RomCom 12, 5 4, 4 Tarek Horror 2, 2 9, 10 Assuming Tarek and Stefan know these payoffs and each acts in their own immediate self-interest: If Tarek has a first mover advantage, Stefan will choose to see a romantic comedy This is a Prisoner's Dilemma: both could be better off by cooperating rather than acting selfishly They will watch a horror movie together because that will maximise the total amount of utility The outcome will be indeterminate because there is more than one Nash equilibrium The fairest option would be for both to watch a horror movie Given the information provided, it is impossible to determine what a rational response would be by each playerQUESTION 4 On the following graph of a demand curve, what is the price clasticity of demand at the point where the price Is $57 Price ($) 10 Demand 9 10 2 3 4 5 G 1 Quantity 0 3 0 2 0 0.5 O Insufficient Information to calculate