ECON 200 Lecture Notes - Lecture 20: Demand Curve
24 Nov 2015
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Econ 200 lecture 20: end of chapter 15, beginning of chapter 16. Chapter 15 terms: competing vs. colluding firms, collude: quantity is low, prices are higher, and profits increase, each firm has the incentive in increase their quantity sold (this relates to the quantity effect, prisoners dilemma vs. Chapter 15 questions: two firms, a and b. Each will produce either one or two barrels of oil. They will make their decisions simultaneously without talking to one another. To make things simple, let"s assume they can produce oil at zero cost: both firms produce a quantity of 2, it is easier to solve this problem by drawing a table of what outcomes and. What is the nash equilibrium? profits each firm will get. In which market structure do we expect firms will not earn positive economic profits in the long run: in both perfect competition and in monopolistic competition.
