a) What is the profit maximising condition in a market with perfect competition?b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market?c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s payoff/Firm B’s payoff)Firm BFirm APrice £2 Price £1Price £2 £20,000/£20,000 £10,000/£24,000Price £1 £24,000/£10,000 £12,000/£12,000Assume you are the pricing manager at Firm A;i) What is your payoff for a ‘maximin’ strategy?ii) What is your payoff for a ‘maximax’ strategy?iii) Does a dominant strategy exist within this prisoners’ dilemma?
a) What is the profit maximising condition in a market with perfect competition?b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market?c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s payoff/Firm B’s payoff)Firm BFirm APrice £2 Price £1Price £2 £20,000/£20,000 £10,000/£24,000Price £1 £24,000/£10,000 £12,000/£12,000Assume you are the pricing manager at Firm A;i) What is your payoff for a ‘maximin’ strategy?ii) What is your payoff for a ‘maximax’ strategy?iii) Does a dominant strategy exist within this prisoners’ dilemma?
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter10: The Firm And The Industry Under Perfect Competition
Section: Chapter Questions
Problem 3DQ
Related questions
Question
a) What is the profit maximising condition in a market with perfect competition?
b) Explain what is meant by abnormal profit? What is the adjustment process from short-run
abnormal profit to long-run equilibrium in a
c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s
payoff/Firm B’s payoff)
Firm B
Firm A
Price £2 £20,000/£20,000 £10,000/£24,000
Price £1 £24,000/£10,000 £12,000/£12,000
Assume you are the pricing manager at Firm A;
i) What is your payoff for a ‘maximin’ strategy?
ii) What is your payoff for a ‘maximax’ strategy?
iii) Does a dominant strategy exist within this prisoners’ dilemma?
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