Intermediate Microeconomic problem set section A & B Coursework

Intermediate Microeconomic problem set section A & B - Coursework ExampleIt is only possible to have overabundant strategy equilibrium as Nash equilibrium, and not Nash equilibrium as dominant strategy. A dominant strategy is a special case of Nash equilibrium since there can be a tie of the strategies made by the players, therefore, moderateing in Nash equilibrium. At that point, no player is capable of making any move since any move made by any player recognises them worse off. They can only make a move if the dominant player makes a move (Kelly, 2003). 5. What are achievement externalities and how can they be eliminated through a merger? Explain, also with the assistance of an example illustrated by a diagram. Production externalities are costs or benefits to a party other than the producer. Production externalities can either be commanding or negative. Positive ware externalities are the benefits that ensue from end product or the construction of a production unit in a pl ace. The benefits are to the society. These benefits result from production externalities that come about as a result of production by companies and industries. The costs that come about as a result of production sum up to negative production externalities. ... Industries emit harmful gases into the atmosphere through the various processes of production. Such gases pollute the environment and more so, the air mess breathe. This results in respiratory diseases when inhaled and also destroys the ozone layer leading to changes in climate. Setting up of industries also involved creating space trough cutting down of trees. pose and having such trees takes ages and this is a cost to the society. Another externality is that traffic jams ensue as industries take up more space for industrial construction. Positive production externalities are the benefits to other third parties other than the producer. Such benefits are enjoyed by third parties. The producer does not enjoy them. An example is where producers provide jobs to the community in which it is set up and provides sponsorships and produce quality and safe products to the society. Have to be charged for emission of gases or harmful substances into the environment. They also pay for pollution permits in order to produce. Industries also pay taxes to the government which acts as a revenue. While society benefits from this, it is a cost to the producer. A merger is where industries come together and exhibit both industries as one. For example, when there is a fishing firm a manufacturing industry that emits sewerage to the water that the fish firm depends on. The fish firm whitethorn decide to buy the manufacturing firm so it becomes one company, so that it is able to control the pollution of the water resource. Thus, by merging the two industries, the costs of the production externality are controlled and reduced (Quiggin and Chambers, 2001). S=maginal social costs(MSC) S= borderline private costs (MPC) Price P * P B D=marginal social benefits (MSB) Q* Q Quantity The difference