us bicy Matt, Brian) in cach cell. Low Price 2018-1) Low Price (200, 3000) ts) If Brian and Matt will play this game only once, what is the Nash eq nant strategy 2) (5 pointsBrian and definition of Nash equilibrium 23 and supply curves for good A are given by QD 1000 -10P Qs- -200+10P If price floor is 80 per unit, compute consumer, producer,tax revenue, total surplus, and deadwe 1) 6 points) When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYCs price elasticity of supply of knee braces is 0.33. 2) (5 points) A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market. 24. Are the following statements true or false? Explain it. 25. Answer each of the following questions. 1) (4 points) What is the ability-to-pay principle? 2) (6 points) How can a proportional tax achieve vertical equity? 26. Answer each of the following questions. 1) (4 points) What is meaning of the marginal tax rate on labor income? 2) (6 points) Is the labor supply more inelastic or more elastic? Briefly summarize the competing theories.
22. 1) Dominant strategy is a strategy for a player i.e. best response to all strategy profile of other player.
Dominant strategy of Matt is to charge low price because payoff of Matt is higher when it charges low price as compared to when it charges high price. Payoff of 1500 is better than 200 and payoff of 5000 is better than 4000.
2) Nash equilibrium is a strategy profile such that for each player given strategy, it is best response. Nash equilibrium is a set of strategies such that each player is doing their best given the strategy of other player.
If Matt choooses to charge low price then best response of Brian is to charge low price because payoff of 1500 is better than 200.
If Brian chooses to charge low price then the best response of Matt is to charge low price because of higher payoff.
So, (Low price; Low price) is the nash equilibrium.
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