Question

6. Statement 1: When a single period game is repeated infinitely, the likely equilibrium outcome will not be changed significantly Statement 2: The predictions of the Bertrand and Coumot models are largely similar for prices when analyzing the case of identical products. Both statements are true b. Statement is true, but 2 is false c. Hoth statements are false d. Siement 2 is true, but is false Statement 1: In the Hotelling model firms select prices, given their locations on a line. Statement 2: The equilibrium outcome in a Hotelling model with 2 firms involves each firm producing largely identical product. Statement 2 is true, but I is false b. Statement is true, but 2 is false c. Both statements are true d. Both statements are false Statement i Competitive firms will always camera economic profit in equilibrium Statement 2: Monopoly is will always eum positive economic profit Both are true b. Both are false Statement is true, but 2 is false d. Statement is true, but is false

Answer 1

6. A singe period game is repeated infinitely only to punish those agents who are deviating from co-operation strategy.. As the game is repeated for infinite numbers of times, the agents do not know when it will stop the stage game(if we consider every repeated game as a stage of the whole game) thus it will not give the likely equilibrium outcome every time.

In both bertrand and cournot model , it is considered that any positive amount of inventories is harmful for the growth of the firm . Thus in bertrand model it is advised to produce that much of output which is realised and in Cournot model it is advised to sell all the output that have been produced. So, in larger aspect they deal with the same idea but in a different way . Thus , for analysing the price of identical products largely both the models are similar.

Thus, Statement 1 is false, statement 2 is true.

7. In a hotelling model, firm selects their location considering the transaction cost and consumers' preferences, not vice-versa.

For two firm hotelling model equilibrium outcome will be same for both the firms while producing identical products only when they are on the half way oppositely on a line. If they are not on the half way one firm will maximise its profit which will be greater than other firm though they are producing same identical products.

Both the statement is False.

8. In short run , competitive market can earn positive, negative and zero profit depending upon the market price and its marginal cost of production and marginal revenue. But in long run , it will always earn zero profit. So it is not true that in equilibrium competitive firms will always earn zero profit.

As a monopoly firm is the price decider in the market , they usually marked the price more than its marginal cost of production to collect all the surplus from the market, thus usually monopoly firm always earn positive amount of profit.

Statement 1 is false, statement 2 is true.