Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
9th Edition
ISBN: 9780134143071
Author: PINDYCK, Robert, Rubinfeld, Daniel
Publisher: PEARSON
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Question
Chapter 12, Problem 7RQ
To determine
The Nash equilibrium and the stability of the Nash equilibrium.
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Explain the meaning of Nash equilibrium when firms are competing with respect to price. Why is the equilibrium stable? Why don’t hey raise prices to maximize joint profits?
Which statement best describes a Nash equilibrium applies to price competition?
1. Two firms cooperate and set the price that maximizes joint profits.
2. Each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price away.
3 given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level.
4. One dominant firm sets the price, and the other firms take that’s price as if it were given by the market.
5. None of the above.
Nash equilibrium can be defined as the competitive outcome where _____A. all firms set prices equal to average cost and all firms make economic profit.B. each firm sets a price equal to marginal cost and each firm makeseconomic profit.C. each firm sets a price higher than marginal cost and each firm makeseconomic profit.D. each firm sets a price lower than marginal cost and each firm makeseconomic profit.E. firms set a price lower than average cost and all firms make economic profit.
Chapter 12 Solutions
Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
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