Which Statement Most Nearly Describes a Nash Equilibrium Applied to Price

question 117

Multiple Choice

Which statement most nearly describes a Nash equilibrium applied to price competition?

• A) Two firms cooperate and set the price that maximizes joint profits.
• B) Each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price anyway.
• C) Given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level.
• D) One dominant firm sets the price, and the other firms take that price as if it were given by the market.

Analyze how changes in price affect consumer surplus.

Interpret tables showing willingness to pay and calculate consumer surplus for individuals and markets.

Understand the relationship between a consumer's willingness to pay, market price, and consumer surplus.

Evaluate the impact of market changes on consumer surplus.

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