Q4) Answer the following, providing a graphical illustration along with your answer where necessary: a) What is the profit maximising condition? b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market? c) Please find below Pricing options for firm A and B along with individual payoffs
Q4) Answer the following, providing a graphical illustration along with your answer where necessary: a) What is the profit maximising condition? b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market? c) Please find below Pricing options for firm A and B along with individual payoffs
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.9P
Related questions
Question
![Q4) Answer the following, providing a graphical illustration along with your answer where
necessary:
a) What is the profit maximising condition?
b) Explain what is meant by abnormal profit? What is the adjustment process from
short-run abnormal profit to long-run equilibrium in a perfectly competitive market?
c) Please find below Pricing options for firm A and B, along with individual payoffs
(Firm A's payoff/Firm B's payoff)
Firm A
Price £2
Price £1
Assume you are the pricing manager at Firm A;
i)
ii)
Price £2
£10,000/£10,000
£12,000/£5,000
Firm B
Price £1
£5,000/£12,000
£6,000/£6,000
What is your payoff for a 'maximin' strategy?
What is your payoff for a 'maximax' strategy?
Does a dominant strategy exist within this prisoners' dilemma?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F832d2fc1-c1b6-45de-b42c-1eb88b916af2%2Fe0189cab-3e5c-4fd8-bd01-e34bbaa421bd%2Fuanxn11_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q4) Answer the following, providing a graphical illustration along with your answer where
necessary:
a) What is the profit maximising condition?
b) Explain what is meant by abnormal profit? What is the adjustment process from
short-run abnormal profit to long-run equilibrium in a perfectly competitive market?
c) Please find below Pricing options for firm A and B, along with individual payoffs
(Firm A's payoff/Firm B's payoff)
Firm A
Price £2
Price £1
Assume you are the pricing manager at Firm A;
i)
ii)
Price £2
£10,000/£10,000
£12,000/£5,000
Firm B
Price £1
£5,000/£12,000
£6,000/£6,000
What is your payoff for a 'maximin' strategy?
What is your payoff for a 'maximax' strategy?
Does a dominant strategy exist within this prisoners' dilemma?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Economics: Private and Public Choice (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781305506725/9781305506725_smallCoverImage.gif)
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
![Microeconomics: Private and Public Choice (MindTa…](https://www.bartleby.com/isbn_cover_images/9781305506893/9781305506893_smallCoverImage.gif)
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
![Economics: Private and Public Choice (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781305506725/9781305506725_smallCoverImage.gif)
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
![Microeconomics: Private and Public Choice (MindTa…](https://www.bartleby.com/isbn_cover_images/9781305506893/9781305506893_smallCoverImage.gif)
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning