Suppose that there are two farmers, Earl and Pearl, who graze their milk cows on the common pasture of their village. Each farmer can purchase up to two cows, and the more cows that are on the pasture, the less grass there will be per cow, meaning each cow will produce less milk. Suppose that cows cost $500 each and milk sells for $2 per litre. The following table summarizes the production of each cow given the number in the pasture. Number of Litres of Milk Cows Per Cow 2. 800 3 600 4 500 What is profit of each farmer in the Nash equilibrium? What would be the efficient number of cows?

Principles of Economics 2e
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Chapter10: Monopolistic Competition And Oligopoly
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Please I need step by step explanation to understand the solution and the concept of how the numbers in the playoff table are going to calculate in this. Thank You for helping me!

Suppose that there are two farmers, Earl and Pearl, who graze their milk cows on the common pasture of
their village. Each farmer can purchase up to two cows, and the more cows that are on the pasture, the
less grass there will be per cow, meaning each cow will produce less milk. Suppose that cows cost $500
each and milk sells for $2 per litre. The following table summarizes the production of each cow given the
number in the pasture.
Number of Litres of Milk
Cows
Per Cow
800
3
600
4
500
What is profit of each farmer in the Nash equilibrium? What would be the efficient number of cows?
Transcribed Image Text:Suppose that there are two farmers, Earl and Pearl, who graze their milk cows on the common pasture of their village. Each farmer can purchase up to two cows, and the more cows that are on the pasture, the less grass there will be per cow, meaning each cow will produce less milk. Suppose that cows cost $500 each and milk sells for $2 per litre. The following table summarizes the production of each cow given the number in the pasture. Number of Litres of Milk Cows Per Cow 800 3 600 4 500 What is profit of each farmer in the Nash equilibrium? What would be the efficient number of cows?
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