Answer to Question #135736 in Macroeconomics for Bryan Burgos

Question

3.3. Situation 3: Firm Y chooses a low-price strategy while Firm X maintains a high-price strategy. Result: Compared to Situation 1, Firm Y has an incentive to cut prices because it will earn $________ million and Firm X will earn $________. Compared to Situation 1, Firm Y will earn $________ million more in profit and Firm X will earn $________ million less in profit. Together, the firms will earn $________ million in profit, which is $________ less than in Situation 1.
3.4. Situation 4: Each firm chooses a low-price strategy. Result: Each firm will earn $________ million in profit for a total of $________ million for the two firms. This total is $________ less than in Situation 1.

Answer 1

3.3. Situation 3: Firm Y chooses a low-price strategy while Firm X maintains a high-price strategy. Result: Compared to Situation 1, Firm Y has an incentive to cut prices because it will earn $_____250___ million and Firm X will earn $___50_____. Compared to Situation 1, Firm Y will earn $____50____ million more in profit and Firm X will earn $___150_____ million less in profit. Together, the firms will earn $___300_____ million in profit, which is $____100____ less than in Situation 1.

3.4. Situation 4: Each firm chooses a low-price strategy. Result: Each firm will earn $__50______ million in profit for a total of $___100_____ million for the two firms. This total is $__250______ less than in Situation 1.