Assume the cost of producing the goods is zero and the figures represent maximum willingness

to pay

Consumer A Consumer B

Good 1 $4,500 $5,000

Good 2 $1,500 $1,000

Suppose the monopolist only sold the goods separately. What prices will the monopolist

charge for Good 1 to maximize profits for good 1?

a) $4,500

b) $5,000

c) $1,500

d) $1,000

Suppose the monopolist only sold the goods separately. What prices will the monopolist

charge for Good 2 to maximize profits for good 1?

a) $4,500

b) $5,000

c) $1,500

d) $1,000

What is the total profit to the monopolist from selling the goods separately?

a) $12,000

b) $13,000

c) $11,000

d) $10,000

What is the total profit to the monopolist from selling the goods separately?

a) $12,000

b) $13,000

c) $11,000

d) $10,000 Consider the following information for a simultaneous move game: If you charge a low price (LP) and

your rival charges a LP, you each will earn $5 million in profits. If both charge a high price (HP), each will

each earn $10 million in profits. However, if one charge a LP and the other does not, the firm that

charges a LP will earn $15 million and the other firm will earn $1 million.

If both firms plan to be in business for one‐year, the Nash Equilibrium will be

a) For each firm charge LP

b) For neither firm to charge LP

c) For one firm to charge LP and the other HP

d) None of the above.

If both firms plan to be in business for 5 years, then the Nash Equilibrium will be

a) For each firm charge a LP every year

b) For neither firm to charge a LP in early years, but to charge a HP in later years.

c) For each firm to charge a HP every year

d) For neither firm to charge a HP in early years, but to charge a LP in later years.

If the businesses last forever, then the Nash Equilibrium is

a) for one firm to charge a HP forever

b) for your firm charge a LP when the other firm does

c) for each firm to charge HP until the rival does, and then to charge a LP forever.

d) for each firm to charge LP until the rival does, and then to charge a HP forever 8th EditionN. Gregory Mankiw1,335 solutions

15th EditionDouglas A. Lind, Samuel A. Wathen, William G. Marchal1,236 solutions

7th EditionN. Gregory Mankiw1,394 solutions

11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman1,012 solutions