Read carefully and answer details please. no hand writing as well. I will check and send back if something is wrong.

J l_ 4.(10 points) (a) A city has nearly 500 restaurants with new one entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. 1Which characteristics of this market are consistent with perfect competition and which characteristics are not consistent with perfect competition? Please give an explanation. (b) Does an individual perfectly competitive rm have any incentive to invest in research and development? You may assume that the market remains perfectly competitive both before and after the research and development and therefore all the assumptions of perfect competition will hold at all times. Please give an explanation. (c) The United States Postal Service (USPS) has a constitutionally guaranteed monopoly on first class mail {mailing an envelope for $0.55). The monopoly exists to this day. 1Why hasn't this monopoly enabled the USPS to earn prots (they currently lose a few billion dollars every year)? Please give an explanation. 5. (10 points The followin urovides information for a one-shot - ame. Firm B Low Price High Price Low Price High Price The rst number in brackets is Firm A's return, and the second number in brackets is Firm B's return. Firm A and Firm B operate in a duopoly in which you and a rival must simultaneously decide what price to advertise in the weekly newspaper. (a) Does Firm A have a dominant strategy? If yes, what is that dominant strategy? (h) Does Firm B have a dominant strategy? If yes, what is that dominant strategy? (c) Is there a Nash equilibrium (or Nash equilibriums) for the above game? If yes, what is that Nash equilibrium? ((1) 1What will the collusive outcome be for the above game? (e) [fa collusive outcome is reached, will either rm have an incentive to cheat on the agreement? Please explain