Micro Economics Answers 2022

MICRO ECONOMICS

Answer a
Payoffs
represent
revenue gain in
millions of USD
Column
R & D No R & D
Row
R & D 50000,10000 100000,0
No R & D 70000,60000 40000,0
Answer b
Nimbus,
Inc.
Cleansweep,
Inc.
Engage in R & D Don’t engage in R & D
Engage in R & D 50000 10000 120000 (20000)
Don’t engage in R & D 70000 60000 80000 40000
Yellow Highlights: Nimbus Inc. Profits
No Highlights: Cleanseep Inc. Profits
Answer c
The cooperative outcome are mentioned as follows.
If both engage in R& D: 60000
If Nimbus engages in R& D and Cleansweep does not: 100000
If Cleansweep engages in R& D and Nimbus does not: 130000
If both do not engage in R& D: 120000
Thus, it can be stated that the firms would not make more economic profit if they collude to
achieve the cooperative outcome.