Question 2. (25 marks) A competitive firm's total cost function satisfies C (Q) = 72 + 300 + 202 for Q > 0 and C (0) = 0, where Q is the output level. The marginal cost is MC (Q) = 30 + 40. a. (7 marks} Find the quantity that minimizes average costs. Show your working. b. (13 marks) Find and draw the supply curve of the rm. c. (5 marks} What is the producer surplus for the price P = 70? How did you calculate it? Question 3. (25 marks) Two Countries, A and B, decide whether or not they should go to war. Each country must decide whether to pursue Peace or attack, causing a War. If a country chooses Peace and its counterpart chooses War, it is caught off guard and loses. Payoffs are given by Country B Peace War Peace Country A War a. (5 marks) Are there any dominated strategies in this game, for either player? Why or why not? b. (5 marks} Find the Nash equilibrium in this game. Explain your work. (5 marks) Now suppose that the spies from Country A are much better than those from Country B, allowing Country A to know B's decision before it makes its own. B knows this, eliminating the element of surprise. Draw the game tree for this new game (where A is the first mover}. (5 marks) Find the backwards induction equilibrium of this game. Explain your work. (5 marks) Depending on your answers to parts b and d, answer % of the following: 1. If both countries receive identical payoffs in your answers to parts b and d, change % payoff in the original matrix to make at least one of the countries receive different payoffs in the new equilibrium. 2. If at least one of the countries receives different payoffs in your answers to parts b and d, change m payoff in the original matrix to make both countries receive identical payoffs in the new equilibrium