1. Do the firms in an oligopoly act independently or interdependently? Explain your answer.

2. A monopolistically competitive firm has the following demand and cost structure in the short run:

Output  Price   FC      VC  TC      TR     Profit/Loss

  0   $90   $90    $ 0  ____     ____     ________

  1      80  ____   40  ____     ____     ________

  2      70  ____   80  ____     ____     ________

  3      60  ____     140  ____     ____     ________

  4      50  ____     220  ____     ____     ________

  5      40  ____     320  ____     ____     ________

  6      30  ____     440  ____     ____     ________

  7      20  ____     580  ____     ____     ________

a.   Complete the table.

b.   What level of output maximizes profit or minimizes loss?

c.   Should this firm operate or shut down in the short run? Why?

3.  Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology.  It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.

a. Briefly explain whether Wal-World has a dominant strategy.

b. Briefly explain whether Tarbo has a dominant strategy.

c. Briefly explain whether there is a Nash equilibrium in this game.