Need Help Please To Answer These Questions

Question

Consider a competitive industry where all firms are identical and each has the following costs.

Output Total Cost Marginal Cost Average Total Cost Average Variable Cost

($) ($) ($) ($)

0 10

1 14

2 16

3 24

4 36

Use the data shown and the missing data to answer the following:

a. What is the long-run equilibrium price? Explain your answer.

b. If the short-run equilibrium price is $12, explain the level of output and profits for the representative firm.

c. If the short-run price is $2, explain the output and profits for the representative firm.

Two firms in the automobile industry can choose to either to maintain prices or to reduce prices. The change in profits for each possible outcome is shown in the table below.

Firm B

Cut Price Maintain Price

Firm A Cut Price A = -50 A = 75

B = -75 B = -150

Maintain Price A = -100 A = 0

B = 50 B = 0

Is this a Prisoners' Dilemma? Explain your answers using precise economic language.

Answer 1