EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 13, Problem 10SP
To determine
Dominance of the market in the long run.
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Home Depot and Lowe's are in a price war on refrigerators. Refrigerators at Home Depot cost $1,000 with a price matching
guarantee of a 10% rebate on the price difference with Lowe's, whose refrigerators cost $800. Is this price matching
guarantee with a 10% rebate beneficial to the consumer?
No, eventually both stores will offer the price matching with rebate and post the price of refrigerators at $1,000, the
High Price.
Yes, consumers will be able to buy their refrigerators at Home Depot for $780.
No, both Lowe's and Home Depot will stop selling refrigerators.
O Yes, consumers will be able to buy refrigerators at either store at the Low Price of $800, the lower posted price.
Suppose there is a remote stretch of highway along which two restaurants, Last Chance Café and Desolate Diner, operate in a duopoly. Neither restaurant invests in keeping up with health code regulations, but regardless they both have customers as they are the only dining options along a 79-mile portion of the road. Both restaurants know that if they clean up and comply with health codes they will attract more customers, but this also means that they will have to pay workers to do the cleaning.
If neither restaurant cleans, each will earn $10,000; alternatively, if they both hire workers to clean, each will earn only $7,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $15,000, and the other restaurant will make only $3,000.
Complete the following payoff matrix using the information just given. (Note: Last Chance Café and Desolate Diner are both profit-maximizing firms.)
Desolate Diner…
Suppose there is a remote stretch of highway along which two restaurants, Last Chance Café and Desolate Diner, operate in a duopoly. Neither
restaurant invests in keeping up with health code regulations, but regardless they both have customers as they are the only dining options along a 79-
mile portion of the road. Both restaurants know that if they clean up and comply with health codes they will attract more customers, but this also
means that they will have to pay workers to do the cleaning.
If neither restaurant cleans, each will earn $13,000; alternatively, if they both hire workers to clean, each will earn only $10,000. However, if one
cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $17,000, and the other restaurant
will make only $5,000.
Complete the following payoff matrix using the information just given. (Note: Last Chance Café and Desolate Diner are both profit-maximizing firms.)
Last Chance Café
Cleans Up…
Chapter 13 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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