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Chapter 13: Answers to Questions and
Problems
1.
M R
a. The horizontal distance between D and D : 16 units.
b. Note that P = $200, AC = $180, and Q = 16, so profits are ($200 -
$180)(16) = $320.
c. Yes; if it can credibly commit to a higher output (e.g., 24), and it will
earn even greater profits.
2.
a. .
b. million. Since this is less than
the profits obtained if entry occurs, the firm should not engage in
limit pricing.
3.
1
读万卷书 行万里路
a. The simultaneous-move equilibrium is (No, No), and Player 1 earns
$300 in this equilibrium. By going first player 1’s best strategy is to
commit to “Yes.” Player 2’s best response would be “Yes”, and
thus Player 1 would earn $400 by going first. The maximum amount
Player 1 should pay for going first is this $100 (or perhaps $99.99).
Importantly, this assumes Player 1’s move is observed by Player 2
before Player 2 makes her decision.
b. Player 2 gets $400 when Player 1 goes first, compared to $525 when
they move at the same time. Thus, player 2 would be willing to pay
up to $125 to keep player 1 from moving first.
4.
a. A network with 14 users provides 14(14 - 1) = 182 potential
connection services.
b. No. Revenues will be $2,450 which is well short of the $8,000 in
costs.
c. Yes. With 182 connection services, each consumer will pay $2,730 to
join the network. Since there are 14 consumers, total revenues are
$38,220. This exceeds the $8,000 required to
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