The above figure shows the payoff for two firms, A and B, that ...

[cartlidgeashley]

The above figure shows the payoff for two firms, A and B, that must each choose to sell either at a high or low price. Determine the dominant strategies for each firm (if any) and the Nash equilibria (if any).
 
  What will be an ideal response?

Question 2

Long-run market supply curves are downward sloping if
 
  A) firms are identical.
  B) the number of firms is restricted in the long run.
  C) input prices fall as the industry expands.
  D) All of the above.

[ndhahbi]

Answer to Question 1

For both firms the dominant strategy is to price low. Thus, the Nash equilibrium is for both firms A and B to price their product low. Note that the total profit is less than if they had both priced the product at a high price.

Answer to Question 2

C