Full ECON 140 tutorial questions.docVIP

ECON 140 tutorial questions Contents Tutorial 1: Strategic behaviour and games. 1 Tutorial 2: Imperfect information. 3 Tutorial 3: Monopoly. 4 Tutorial 4: Duopolies. 5 Tutorial 5: Government policies towards competition. 6 Tutorial 6: Aggregate expenditure. 7 Tutorial 7: The aggregate demand-inflation (ADI) curve. 8 Tutorial 8: Fiscal Policy and automatic stabilisers. 10 Tutorial 9: Discretionary fiscal policy. 11 Tutorial 10: Monetary policy. 12 Tutorial 1: Strategic behaviour and games. (1). Why is game theory particularly helpful for understanding markets with only a few firms? (2). Firm 1 has contracted Firm 2 to provide information technology services. However, a disagreement about the implications of the contract means that the two firms need to negotiate. Each firm must decide whether to bring its lawyer to the negotiation. The payoff from each outcome is given in the following matrix. (a) What is the Nash equilibrium outcome? Is that outcome socially efficient? Explain your reasoning and discuss the implications of your answer. (b) Would the outcome be different if Firm 1 could commit to its decision before Firm 2 made its own decision? Explain your reasoning and assumptions. Game for question 2 (3). A train company and a bus company are setting timetables. Both companies benefit if the two timetables are co-ordinated so that passengers arriving in town on the train can then catch a bus - i.e. if buses depart 15 minutes after the train arrives. Both get a payoff of three if the train arrives at 8:00 and the bus departs at 8:15, or if the train arrives at 7:00 and the bus departs at 7:15. But if the train arrives at 7:00 and the bus leaves at 8:15, or if the train arrives at 8:00 and the bus departs at 7:15, then both companies get zero. (a) Draw the game matrix for this game. Assume that 7:00 and 8:00 are the only potential times to timetable the train to arrive and 7:15 and 8:15 are the only potential times for the bus to depart. (b) Do either of