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solve thses ecomnomics question of campetiaive firm chapter plesea 5. The table is the payoff matrix for a simple tworm game. Firms A and B

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solve thses ecomnomics question of campetiaive firm chapter plesea

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5. The table is the payoff matrix for a simple tworm game. Firms A and B are bidding on a government contract, and each rm's bid is not known by the other rm. Each rm can bid either $10 000 or $5000. The cost of completing the project for each firm is $4000. The lowbid rm will win the contract at its stated price; the highbid rm will get nothing. If the two bids are equal, the two rms will split the price and costs evenly. The payoffs for each rm under each situation are shown in the matrix. B bids $10 000 A bids $10 000 A bids $5000 Payoff to A=$3000A=$3000 Payoffto A=$1000A=$1000 Payoff to B=$30003=$3000 Payoff to B=$OB=$0 B wins the contract Firms share the contract Payoff to A=$0A=$0 Payoff to A=$500A=$500 Payoff to B=$100013=s1mo Payoff to B=$5003=$5 no a. Recall from the text that a Nash equilibrium is an outcome in which each player is maximizing his or her own payoff given the actions ofthe other players. Is there a Nash equilibrium in this game? b. Is there more than one Nash equilibrium? Explain. c. If the two rms could cooperate, what outcome would you predict in this game? Explain. 1. Describe, and show by graph, the relationship between marginal cost and average cost. 2. Under what conditions should a competitive rm shut down in the short run? Also show it in a graph. 3. How does the demand curve for monopolist rm differ from the demand curves for rms in competitive market structures? Show it by graphs. 4. The diagram below shows supply and demand in a perfectly competitive local market for cubic metres (m3) of garden soil. 60 $5 .\\' 50 45 4o 35 10 Price I5 per m3] 25 2.0 15 IO 5 D 10 20 .10 40 50 60 70 R0 90100110120 Quantity [m' per day] a. At the equilibrium market price, determine the following values: -total revenue received by sellers - consumer surplus - producer surplus -total economic surplus b. Now suppose that sellers in this market cooperate and restrict their total output to 30m3 per day. At the resulting price of $45 per m3,m3, determine each of the same values as in part (a). c. What is the change in consumer surplus when output is restricted? What is the change in producer surplus? d. What is the deadweight loss to the economy in this market when output is restricted? Show the area of this loss in the diagram

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