Author Question: Suppose two firms are trying to decide how much to budget for research and development. Once a new ... (Read 40 times)

fox · **on:** Jun 29, 2018

Suppose two firms are trying to decide how much to budget for research and development. Once a new discovery is made, each firm benefits regardless of which firm developed the innovation.

In this R&D game of chicken, the Nash equilibrium will be that A) either both firms conduct the R&D or neither firm conducts the R&D.
B) only one firm conducts the R&D but which firm conducts the R&D cannot be determined.
C) both firms conduct the R&D.
D) neither firm conducts the R&D.

Question 2

If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure

A) new firms will enter the industry.
B) some firms will exit the industry.
C) their economic profit would be zero.
D) they would each produce 60 units.