Refer to Table 14-2. Is the current strategy in which each firm charges the low price and earns a profit of $7,000 a Nash equilibrium? If not, why and what is the Nash equilibrium?
A) No, it is not a Nash equilibrium because each firm can do better by charging the high price. The Nash equilibrium occurs when each firm charges the high price and earns a profit of $10,000.
B) No, the current situation is not a Nash equilibrium. The Nash equilibrium for each firm is to have the other charge a high price and for the firm in question charge a low price.
C) Yes, the current situation is a Nash equilibrium.
D) No, the current situation is not a Nash equilibrium; it is a dominant strategy equilibrium. There is no Nash equilibrium in this game.
C
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Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A
A) has a lower opportunity cost of producing good X than has B. B) has a lower opportunity cost of producing good X than of producing good Y. C) can produce more units of X in a given time period than can B. D) can produce X using newer technology than can B.
What condition must be satisfied so that society is producing the efficient mix of output? Why does this condition guarantee efficiency?
What will be an ideal response?