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**ECO 550 Week 7 Check Your Understanding (A+ Work)**

Chapter 13: Problems 2, 13, and 15

Chapter 14: Problems 3(b, c, d), 5(a, b, c), and 8(a, b, c)

Chapter 13: Problems 2, 13, and 15

2. Consider the following payoff matrix:

a. Does Player A have a dominant strategy? Explain why or why not.

b. Does Player B have a dominant strategy? Explain why or why not.

13. Analyze the following sequential game and advise Kodak about whether they should introduce the new product, Picture CD.

15.A math graduate student explains to her friend how to approach a group of smartattractive guys who have brought along famous actor Russell Crowe. What shouldher friend do? Ignore Russell Crowe or fixate on Russell Crowe? Explain the equilibrium reasoning underlying your answer. (Note: Best payoff—date with R.C., Better—date with other guys, Worse—no date tonight, Worst—nodate ever with any of these guys.)

Chapter 14: Problems 3(b, c, d), 5(a, b, c), and 8(a, b, c)

3. American Export-Import Shipping Company operates a general cargo carrier service between New York and several Western European ports. It hauls two majorcategories of freight: manufactured items and semi manufactured raw materials.

b. . What are the profit-maximizing levels of price and output for the twofreight categories?

c. At these levels of output, calculate the marginal revenue in each market.

5. Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to the Superior Company for further processing and eventual sale asa completely different product. The demand function for each of these markets is

Retail Outlets: P1 = 60 − 2 Q1

Superior Company: P2 = 40 − Q2

whereP1 and P2 are the prices charged and Q1 and Q2 are the quantities sold inthe respective markets.

Phillips’ total cost function for the manufacture of thisproduct + 8(Q1 + Q2)5.

a. Determine Phillips’ total profit function.

b. What are the profit-maximizing price and output levels for the product inthe two markets?

c. At these levels of output, calculate the marginal revenue in each market.

8. The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be ,500 − 0.0005Q

The marginal (and average variable) cost of producing the computer is $900.

a. Compute the profit-maximizing price and output levels assuming Pear acts as a monopolist for its product.

c. Calculate the contribution to profit and overhead for each of the 10 time periods and prices.

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