Solve the following attachments.
4. Provide a hypothetical payoff matrix for Case 1. From the following payoff matrix, where the Study 11-2 in this chapter. payoffs are the profits or losses of the two firms, determine (a) whether firm A has a dominant 5. From the following payoff matrix, where the strategy, (b) whether firm B has a dominant payoffs (the negative values) are the years of strategy, and (c) the optimal strategy for each firm. possible imprisonment for individuals A and B, determine (a) whether individual A has a dominant Firm B strategy, (b) whether individual B has a dominant strategy, and (c) the optimal strategy for each Low Price High Price individual. (d) Do individuals A and B face a prisoners' dilemma? Low Price (1, 1) (3, 21) Firm A High Price (21, 3) (2. 2) Individual B 2. From the following payoff matrix, where the Confess Don't Confess payoffs are the profits or losses of the two firms, determine (a) whether firm A has a dominant Confess (25, 25) (21, 210) strategy, (b) whether firm B has a dominant Individual A strategy, (c) the optimal strategy for each firm, and Don't Confess (210, 21) (22, 22) (d) the Nash equilibrium, if there is one. Firm B 6. Explain why the payoff matrix in Problem 1 indicates that firms A and B face the prisoners' Low Price High Price dilemma. Low Price (1, 1) (3, 21) 7. Do firms A and B in Problem 2 face the prisoners Firm A dilemma? Why? High Price (21, 3) (4, 2) *8. From the following payoff matrix, where the affe and B1. The market for cigars in New York City is perfectly competitive, with the weekly demand and supply curves given by QD -110 - 10P Qs = 5 +5P A. Using the equations, solve for equilibrium price and quantity in this market. B. Next, graph the demand and supply curves in the grid below. Be sure to indicate equilibrium price and quantity. Check that equilibrium price and quantity in the graph match your answer to part A (above). Price S Market for Cigars 20 19 18 17 16 15 14 13 12 5 10 13 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Quantity of CigarsI. In the perfectly competitive crude oil industry of Texasmania, all the firms drill crude oil from a single pool. Assume that each competitor believes that she can sell all the oil she can come up with at a world market price of $10 per barrel of crude oil. Assume further that the operating cost of a well for a year is $1,000. Total output per year, Q, of the oil field is a function of the number of wells, N, operating: Q = 500 N - N' The amount of crude oil produced by each well, q, is as follows: q = 210 =500-N Use mathematics, diagrams and economic intuition where appropriate. a. What is the perfectly competitive equilibrium output and the equilibrium number of wells? Is there a divergence between social and private marginal cost in the industry just like is there a divergence between marginal and average product in the industry? b. Suppose now the government intervenes and takes over the oil field. How many oil wells should it operate? What is the total output? What is the output per well? C. As an alternative to what effectively amounts to the nationalization of the oil field above, the Texasmanic Government is considering an annual license fee per well to discourage crude oil overdrilling. What is the magnitude of the license fee to induce the industry to drill the optimal number of wells? d. Briefly evaluate and compare the two allocation mechanisms in a) and b).Labour Markets: Consider a hypothetical market for lowskilled labour. For simplicity, assume the short-run supply of workers is given by the equation Cis 2 10B + 1U w, where Os is the quantity supplied and w is the wage.The demand curve is given by Gd 2 25d 5w, whereCtd is the quantity demanded. 1. Provide some intuition as to why the elasticities are inelastic. 2. Supposethegovernmentweretoimplementaminimumvvage[apriceoorfrthatincreased the wage by 50%. Using your calculated elasticities, determine the response of workers and rms. Conrm these results using the equations for Gs and Gd. 3. Given the original wage {part 1] and the new wage {part 4], use the midpoint method to calculate the price elasticities of sup ply and demand. 4. This results in a surplus of workers. How large is this surplus? 5. Consider the longrun supply of workers. Specifically, suppose individ uais who have not yet entered the workforce see this surplus {unemployment}. How might they respond? Specifically, what substitutes might they identify for working in this market and how might that affect the elasticity of the longrun labor supply curve? 6. Consider the longrun demand for workers How might rms respond to the new wage [part 4} and how will this affect the price elasticity of demand. Suppose this response results in a new demand curve given by Ci'd = ZLD lDw. Calculate the price elasticity of demand at the wage in part 4. i". Suppose the minimum wage did not exist. Find the market equilibrium {price and quantity} given C'Is and G'd [the long -run demand for lowskilled workers. Calculate the price elasticities of supply and demand at this new equilibrium
