Suppose that United Airlines and American Airlines are the only air carriers that serve between New York and Boston. Each currently earns a profit of $6,000 per flight on this route. If United increases its advertising spending in this market by $1,000 per flight, and American spends no more on advertising than it does now, United's profit will rise to $8,000 per flight and American's will fall to $2,000. If both spend $1,000 more on advertising, each will earn an economic profit of $5,500 per flight. These payoffs are symmetric, so that if United spends the same amount on advertising while American increases its spending by $1,000, United's economic profit will fall to $2,000 per flight and American's will rise to $8,000. American's Choices Raising Spending Leave spending as same Raising $5500 for United $8000 for United United Spending Choice $5500 for American $2000 for American Leave spending $2000 for United $6000 for United as same $8000 for American $6000 for American a) Does each player have a dominant strategy? (1 mark) What are the potential equilibriums? (1 mark) c) Is this game a prisoner's dilemma? Explain (1 mark)Question 4 (6 marks) a) Suppose that market demand for a good is Q = 480 - 2p. The marginal cost is MC = 2Q. Calculate the deadweight loss resulting from a monopoly in this market. (4 marks) b) Suppose a firm has the following total cost function: TC = 100 + 4q2. What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run? (2 marks)Question 3 (4 marks) S 4 D 500 1000 1500 Q a) Figure above shows the demand and supply curves in the market for milk. Currently the market is in equilibrium. If the government imposes a $2 per gallon tax to be collected from sellers, estimate the change in p, Q, and social welfare. (2 marks) b) If the government establishes a $2 per gallon price ceiling to ensure that children are nourished, estimate the change in p, Q, and social welfare (2 marks)