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# The demand curve for education in a community with only two colleges is P 100 Q The cost of e Show transcribed image text Question 1 The demand curve for

Questions 1 and 2

Show transcribed image text Question 1; The demand curve for education in a community with only two colleges is P = 100 - Q. The cost of educating an additional student is 8. Complete the table below for the four scenarios described in a-d. There are no fixed costs. a. Both colleges get together and collude to price fix at a profit maximizing level. b. Both colleges assume that the other will hold the present tuition constant despite what the competition does. c. Both colleges assume that the other will hold the present enrollment constant despite what the competition does. d. College 1 believes college 2 will adjust to its new profit maximizing solution each time college 1 adjusts its enrollment strategy Question 2: In a dry and dusty desert town, only two people (Antoinette and August) have water wells. Each day, they begin their morning by pumping water, which they then bring to the town square to sell. Pumping water costs them essentially nothing, but time is such that each can afford to make only one trip to the town center, which means that they must decuide how much to pump at the start of each day. The townsfolk's demand for water is given in the table below: Suppose for simplicity that Antoinette and August are limited to pumping either 20, 30, 40 or 50 gallons of water each. a-Verify that the payoffs in the game table in the next page, which reflect the profits Antoinette and August earn, are accurate. Fill in any missing values. Remember that the market price is determined by total production, but that each producer's profit is determined by how much each chooses to produce. b. Suppose that Antoinette and August agree to collude and restrict their combined output to maximize their joint profits. They agree to divide production an dprofits equally. Referring to the payoff matric above, how many gallons will they agree to produce in total? How many gallons of the total market supply will each supply? How much profit will each earn? c. Does Antoinette have an incentive to cheat on this collusive agreement? Does August? If so, how will such cheating manifest itself? d. How does the game Antoinette and August are playing resemble a prisoner's dilemma game?

May 15 2020 View more View Less