ECO101H1 Study Guide - Midterm Guide: Strategic Dominance, Normal-Form Game, Marginal Cost
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ECO101H1 Full Course Notes
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Marginal cost falls and because of ldr it eventually rises: if mc schedule has usual slope, then: Arithmetic: class (and text) examples: sometimes assume that mc is constant. To focus on an issue, in a case where the usual diagram would add complication, but not clarification. When q=8, afc = 20/8 = 2. 5. Cigarette producers (few, aware of mutual interdependence) Canada decided to ban advertising because of health concerns and there was no complain from the producers. Most advertising is not geared towards attracting new smokers but to cancelling the actions of other cigarette firms. Dominant strategy: advertise on tv, earn million each. Ban on advertising: do not advertise on tv, earn million each. 1) each firm cares only about its own profits (which it tries to maximize) 2) each firm does not know what other firm will do. 3) each firm, for each possible action by the other, chooses its best strategy.
