Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 8MC
To determine
Bargaining.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
(1) Patricia owns a cleaning business with Sarah. They both have other jobs and are trying to determine the number of hours to work at the cleaning business. The following payoff matrix shows their daily incomes depending on the number of hours they work at the cleaning business.
If Patricia chooses to work full time and Sarah works part time, what will each earn in daily income?
A-Patricia will earn $60; Sarah will earn $60. B-Patricia will earn $50; Sarah will earn $80.
C-Patricia will earn $80; Sarah will earn $50. D-Patricia will earn $55; Sarah will earn $55.
E-Indeterminate
(2) Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets.
The government imposes a new $5…
Daniel and Kevin are two hardworking builders for solo, independently-owned companies. They can produce Chairs and Tables. As a result, they each have PPFs (Possibilities Production Frontiers) that illustrate their production. Daniel's PPF is shown by the equation: Qc = 12 - 3Qt. Likewise, Kevin's PPF is shown by the equation: Qt = 12 - 3Qc. Since they trust each other and are honest in their terms, Daniel and Kevin trade with each other and only each other; they do not take their goods to markets, and they do not interact with outside sellers/buyers. Since they want to make sure that they provide for their families in the most fair way possible, they set up and agree upon a few terms of trade. The terms are as follows: FIRST, the terms of trade are 1 Chair in exchange for 1 Table. SECOND, each of them specializes according to their own comparative advantage. THIRD, since Kevin needs a few extra things, he CONSUMES 3 units of the goods that he produces.
With that said, I have a few…
The conventional wisdom for urban economic development is: “Don’t put all your eggs in one basket. Diversify the economy.” To explain the idea of diversification, consider old McDonald, who must carry a dozen eggs from the barn to the house. The ground between the barn and the house is slippery, so there is a 50 percent chance that McDonald will slip on a given trip and break all the eggs in his basket. Consider two strategies: a one-basket strategy (a single trip with all 12 eggs) and a two-basket strategy (two trips, with 6 eggs per trip). INDEPTH ANSWERS.
Questions= (1.)List all of the possible outcomes under each of the strategies.
Question (2.)What is the expected number of delivered (unbroken) eggs under each strategy ?
Question (3.)What are the trade-offs between the two strategies? If you were McDonald, which strategy would you adopt?
Question (4.)What are the lessons for economic development strategies?
Chapter 16 Solutions
Managerial Economics: A Problem Solving Approach
Knowledge Booster
Similar questions
- 2. Why does sharecropping continue to exist as opposed to laborers renting land and paying for the rent with the proceeds of their harvest? Sharecropping is a farming system in which owners of the land allow others to farm it and then the harvest is split, with some portion (let's say half) going to the laborer and some to the land owner. Renting land (the "English system") is an alternative in which laborers pay a fixed monetary rent and then keep all of the proceeds of their production. For hundreds of years commentators have pointed out that sharecropping lowers overall investment and effort and that renting both generates more revenue for owners and, on average, more revenue for laborers due to the harvest generally being much larger. However, when prices drop significantly for agricultural outputs, rents can exceed the total value of output under the English system. Given that in the English system rent returns more money to land owners and on average generates more income…arrow_forwardSplitting Pizza: You and a friend are in an Italian restaurant, and the owner offers both of you a free eight-slice pizza under the following condition. Each of you must simultaneously announce how many slices you would like; that is, each player i ∈ 1, 2 names his desired amount of pizza, 0 ≤ si ≤ 8. If s1 + s2 ≤ 8 then the players get their demands (and the owner eats any leftover slices). If s1 + s2 > 8, then the players get nothing. Assume that you each care only about how much pizza you individually consume, and the more the better.What outcomes can be supported as pure-strategy Nash equilibria?arrow_forwardLane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it. If the cost of paving the driveway is $2,000 and Lane proposes that they each pay 50 percent of this cost, then Riley ______ agree to Lane’s proposal because ______. A. will; repaving the driveway would increase total economic surplus B. will not; repaving the driveway would lower total economic surplus C. will; if they split the cost, then Riley’s economic surplus would increase D. will not; if they split the cost, then Riley’s economic surplus would decreasearrow_forward
- Suppose that A and B benefits changed based on whether or not they work together. Imagine they are negotiating over a lease on some office space. In this case A and B would gain more from having the office space all to itself. Say, A's benefit from leasing the offices on its own is 100 while its benefit from sharing the offices with B is only 85. Similarly, B's benefit from leasing the offices on its own is 200 while its benefit from sharing the offices with A is only 175. How then do we calculate how much each party should pay when they work together? Let's go through the example when the cost is 100. We first want to calculatethe pie. The pie is a. 15 b. 35 c. 50 d. 80 e. None of the abovearrow_forward12.3 Armed Conflict: Consider the following strategic situation: Two rival armies plan to seize a disputed territory. Each army's general can choose either to attack (A) or to not attack (N). In addition, each army is either strong (S) or weak (W) with equal probability, and the realizations for each army are independent. Furthermore the type of each army is known only to that army's general. An army can capture the territory if either (i) it attacks and its rival does not or (ii) it and its rival attack, but it is strong and the rival is weak. If both attack and are of equal strength then neither captures the territory. As for payoffs, the territory is worth m if captured and each army has a cost of fighting equal to s if it is strong and w if it is weak, where s <w. If an army attacks but its rival does not, no costs are borne by either side. Identify all 12.7 Exercises • 267 the pure-strategy Bayesian Nash equilibria of this game for the following two cases, and briefly describe…arrow_forwardAn old lady is looking for help crossing the street. Only one person is needed to help her; if more people help her, this is no better. You and I are the two people in the vicinity who can help; we have to choose simultaneously whether to do so. Each of us will get pleasure worth a 3 from her success (no matter who helps her), But each one who goes to help will bear a cost of 1, this being the value of our time taken up in helping. If neither player helps, the payoff for each player is zero. Set up this game in strategic form.arrow_forward
- Hello, please help me to solve part (d) and (e):Charlie finds two fifty-pence pieces on the floor. His friend Dylan is standing next to him when he finds them. Chris can offer Dylan nothing at all, one of the fifty-pence pieces, or both. Dylan observes the offer made by Charlie, and can either accept the offer (in which case they each receive the split specified by Charlie) or reject the offer.If he rejects the offer, each player gets nothing at all (because Charlie is embarassed and throws the moneyaway).(a) Formulate this interaction as an extensive-form game. To keep things simple, players’ payoff is equal to their monetary gain.(b) List all histories of the game. Split these into terminal and non-terminal histories.(c) What are the strategies available to Charlie? What are the strategies available to Dylan? Draw the strategic-form game.(d) Find the pure-strategy Nash equilibria of this game.(e) What do you think will happen?arrow_forwardTwo parties, Juan and Ben, have been negotiating the purchase by Ben of Juan's car. Juan receives a new and higher bid for his car from Adriana. How might Adriana's bid change Juan and Ben's threat values? The threat values are unchanged. Juan now values the car at the price of Adriana's bid, her bid is his opportunity cost of selling the car to Ben, and that opportunity cost is Juan's new threat value. Juan's new threat value is the product of the difference between Ben and Adriana's offers and the probability the car will be sold to Adriana. Juan's threat value is unchanged, but Ben has to consider his new opportunity costarrow_forwardWrite out the extensive form of a game between a farmer (playing in the first round) and nature (playing a mixed strategy in the second round). Assume that the farmer can either pay a cash rent of $1500 for land (English system) or 1/2 of crop production to the landlord (sharecropping). Assume the farmer is planting corn and will produce 2 tons of corn. Assume that nature has a 50% chance of playing a strategy in which the price of corn is $3500/ton and a 50% chance of playing a strategy in which the price of corn is $500/ton. The farmer keeps any money left after paying cash rent and sells any corn left after paying the landlord in sharecropping. What is the most that a risk neutral farmer would be willing to pay for an accurate prediction of the price of corn in problem 1 before choosing whether to pay cash rent or sharecrop?arrow_forward
- It is well-known that when a couple ‘lives together before marriage,’ then this increases the chance of divorce.How might an economist explain this phenomenon, using the concept of opportunity cost? Briefly explain.arrow_forwardConsider the following two-player game.First, player 1 selects a number x≥0. Player 2 observes x. Then, simultaneously andindependently, player 1 selects a number y1 and player 2 selects a number y2, at which pointthe game ends.Player 1’s payoff is: u1(x; y1) = −3y21 + 6y1y2 −13x2 + 8xPlayer 2’s payoff is: u2(y2) = 6y1y2 −6y22 + 12xy2Draw the game tree of this game and identify its Subgame Perfect Nash Equilibrium.arrow_forwardHistorically, how have the three sectors evolved?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning