1.) Fizzy Water Inc. and Bubbly Water Co. are Cournot competitors in the sparkling water industry....

1.) Fizzy Water Inc. and Bubbly Water Co. are Cournot competitors in the sparkling water industry. Let the output of each competitor be denoted by QF and QB, respectively. The demand curve for sparkling water is given by P = 422 - Q where Q = QF + QB. If each firm has a marginal cost of production equal to $56 what is the price level that will be charged in the market in equilibrium?

a.) 244 b.) 122 c.)366 d.)178

2.) You are the manager of Big Cats Real Estate which specializes in construction of luxury apartment buildings. Your marketing team informs you that the company has to choose an advertising strategy in order to compete with your largest competitor, C. Baskin Builders. You are given the following information:

If C. Baskin Builders runs an "aggressive" ad strategy and if you choose to run an "aggressive" strategy in response, your revenues will increase by $2,800,000. If you choose to run a "passive" ad strategy in response your revenues will increase by $1,900,000.

If C. Baskin Builders chooses to run a "passive" ad strategy instead, your company would see revenues increase by $3,700,000 if you ran an "aggressive" ad strategy. Your revenues would increase by $2,900,000 if you ran a "passive" strategy in response.

Which of the following is true?

A.) Big Cats Real Estate should choose a mixed strategy in advertising to maximize payoffs.

B.) Big Cats Real Estate has a dominant strategy in "aggressive" advertising.

C.) Not enough information to answer this question.

D.) Big Cats Real Estate has a dominant strategy in "passive" advertising.

Please explain

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Expert Solution

Rahul Sunny answered 1 week ago

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