Download Review Questions on Intermediate Microeconomic Theory - Final Exam | ECO 202 and more Exams Microeconomics in PDF only on Docsity! Name Davidson College Mark C. Foley Department of Economics Aug - Dec 2004 Intermediate Microeconomic Theory Review #4 Directions: This review is a closed-book, closed-notes exam to be taken in one sitting, no time limit. You may use a calculator. There are 120 points on the exam. Each problem is worth 20 points, except problem 3 which is worth 40 points. You must show all your work to receive full credit. Any assumptions you make and intermediate steps should be clearly indicated. Do not simply write down a final answer to the problems without an explanation. Honor Pledge: Time started: Time finished: Problems Answer all questions (No choice ). 1. Consider the following two-player game, represented in extensive form. Player 1 chooses first, between options C and D. Then, if C is chosen, player 2 chooses between E and F, and if E, then player 1 gets a final choice between G and H. Payoffs are indicated at the end of each branch of the game tree, with player 1’s payoff listed first. (a) Write down all the strategies for both players. Remember that a strategy is a complete plan of action, specifying what each player would do at each of their nodes. (b) Construct the normal form of this game and circle all pure strategy Nash equilibria. (c) List all subgame perfect Nash equilibria and explain. 2 Player 2 E F Player 1 G H 3, 1 1, 2 0, 0 Player 1 C D 2, 0 3. Assume an industry has two firms and market demand is given by QP 2100 where BA qqQ . The firms have the following cost functions 2 AA qTC and 23 BB qTC . Fill in the following table. Model Firm A’s quantit y (qA) Firm B’s quantit y (qB) Total Output (Q) Market Price (P) Firm A’s profit (pA) Firm B’s profit (pB) Dominant firm model (firm A is price leader, firm B is competitive fringe firm, the follower) Cournot duopolists Stackelberg model (firm a is leader; firm B is Cournot follower) Bertrand competitors 5 3. (work space) 6 4. Players A and B have found $100 on the sidewalk and are arguing about how it should be split. A passerby suggests the following game: “Each of you state the number of dollars that you wish (dA, dB). If dA + dB is less than or equal to 100, you can keep the figure you named, and I’ll take the remainder. If dA + dB exceeds 100, I get to keep the $100. Is there a unique Nash equilibrium in this game of continuous strategies (i.e., assume they could walk to a bank and split the money down to the penny)? Explain. 7
