7. The table below shows the annual profits of two UK paint manufacturers. At present they both charge £20.00 per litre for gloss paint. Their annual profits are shown in box A. The other boxes show the effects on their profits of one or the other, or both firms reducing their price to £16.00 per litre. £20.00 Fenton's price i. ii. £16.00 A B £20.00 £6m each Mellow's price £9m for Fenton £3m for Mellow C D £16.00 £3m for Fenton £9m for Mellow £4m each (a) Which of the two prices should Mellow charge if it assumes that Fenton will set its price at £20?. it assumes that Fenton will set its price at £16?. (b) Which of the two prices should Fenton charge if i. ii. it assumes that Mellow will set its price at £20?. it assumes that Mellow will set its price at £16?. (c) Why is this known as a dominant strategy game? £20.00/£16.00 £20.00/£16.00 .£20.00/£16.00 £20.00/£16.00 (d) Assume now that the 'game' between Fenton and Mellow has been played for some time with the result that they both learn a 'lesson' from it. What are they likely to do?

7. The table below shows the annual profits of two UK paint manufacturers. At present they both charge £20.00 per litre for gloss paint. Their annual profits are shown in box A. The other boxes show the effects on their profits of one or the other, or both firms reducing their price to £16.00 per litre. £20.00 Fenton's price i. ii. £16.00 A B £20.00 £6m each Mellow's price £9m for Fenton £3m for Mellow C D £16.00 £3m for Fenton £9m for Mellow £4m each (a) Which of the two prices should Mellow charge if it assumes that Fenton will set its price at £20?. it assumes that Fenton will set its price at £16?. (b) Which of the two prices should Fenton charge if i. ii. it assumes that Mellow will set its price at £20?. it assumes that Mellow will set its price at £16?. (c) Why is this known as a dominant strategy game? £20.00/£16.00 £20.00/£16.00 .£20.00/£16.00 £20.00/£16.00 (d) Assume now that the 'game' between Fenton and Mellow has been played for some time with the result that they both learn a 'lesson' from it. What are they likely to do?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter13: Monopoly And Antitrust

Section: Chapter Questions

Problem 13P

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MN 00 工 25 Price %24 For the monopolistically competitive firm in the following figure, the profit-maximizing price is and the quantity is MC ATC 32 20 Demand MR Quantity O $20; 25 O $16; 25 O $32; 25 O $20; 40 10:12 PM 75°F ENG earch 12/12/2021 f12 Ins prt sc delete home 61 pua f5 dn 6d f4 84 114 144 米 backspace lock 4. 5. R. home enter 4. K. pause ↑ shift end 2. C. alt ctrl
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