Author Question: In a duopoly game we observe the following payouts: if the two firms collude they will each earn ... (Read 111 times)

berenicecastro · **on:** Jun 29, 2018

In a duopoly game we observe the following payouts: if the two firms collude they will each earn 50,000. If one firm cheats then he earns 60,000 and the other firm earns -10,000. If both firms cheat then they each earn zero economic profit.

In this game what is the Nash equilibrium? A) Both firms cheat.
B) Only one firm will cheat.
C) Neither firm will cheat.
D) It is impossible to say.

Question 2

A decrease in the price of a fixed factor of production decreases total cost and

A) increases marginal cost.
B) leaves marginal cost unchanged.
C) decreases marginal cost.
D) increases variable cost.