In the town of Fargo there are two bakers, Alma and Blanca. Alma's bread tastes just like Blanca's – nobody can tell the difference. Alma has constant marginal costs of $1 per loaf of bread. Blanca has constant marginal costs of $2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Fargo is p = 38 - 0.08q, where q is the total number of loaves sold per day. Suppose that Blanca always gets up an hour earlier than Alma and has her bread in the oven before Alma gets started. Alma therefore makes her decision on how much bread to bake after observing Blanca's decision. How many loaves of bread will Blanca bake? Answer: 237.5 The correct answer is: 218.75 [This question continues from above] How many loaves of bread will Alma bake? Answer: 106.25 The correct answer is: 121.88 (This question continues from above.] What is the price of bread in Fargo? Answer: 10.5 The correct answer is: 10.75

In the town of Fargo there are two bakers, Alma and Blanca. Alma's bread tastes just like Blanca's – nobody can tell the difference. Alma has constant marginal costs of $1 per loaf of bread. Blanca has constant marginal costs of $2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Fargo is p = 38 - 0.08q, where q is the total number of loaves sold per day. Suppose that Blanca always gets up an hour earlier than Alma and has her bread in the oven before Alma gets started. Alma therefore makes her decision on how much bread to bake after observing Blanca's decision. How many loaves of bread will Blanca bake? Answer: 237.5 The correct answer is: 218.75 [This question continues from above] How many loaves of bread will Alma bake? Answer: 106.25 The correct answer is: 121.88 (This question continues from above.] What is the price of bread in Fargo? Answer: 10.5 The correct answer is: 10.75

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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