ECON 1101 - Uncle Toby’s is A Producer Of Breakfast Cereal - Economics Assignment Help

Assignment Task

Part A - 100 points Each question in this part is a True, False, or Uncertain question. For each question you must answer whether the statement in italics is True, False, or Uncertain, and justify your response. Statements made not in italics should be taken as fact/assumptions. Each question in this part is worth a maximum of 10 points. 
There is a 100 word world limit for each question. You must include a word count for each question. Answers over the word limit, or where a word count is not given, may be penalised, up to receiving a mark of zero. 
1. According to the Nash Bargaining model of employment, minimum wage laws are not a cause of unemployment. 
2. The Australian Federal government is reducing the government subsidy to under graduate degrees in economics (and other fields) for students starting from 2021, and increasing the subsidy in other fields, such as mathematics. 
Studies suggest that students’ degree choice at university is highly price inelastic. Given that degree choice is highly price inelastic, the government should expect rel atively little change in the study of either Economics or Mathematics due to this change in subsidy. 
3. For a profit-maximizing firm, marginal revenue is always less than price. 
4. Uncle Toby’s is a producer of breakfast cereal, operating in a monopolistically com petitive market. Suppose that makers of breakfast cereals are currently making extraordinary profit (positive economic profit). In the long-run, Uncle Toby’s will have zero economic profit. 
5. A small open economy tends to be a price-taker and therefore can never be an ex porter. 
6. In both goods markets and the labour market, demand is downward sloping and supply is upward sloping. Despite this superficial similarity, the reasons why De mand is downward sloping and Supply is upward sloping are very different for goods markets compared to the labour market. 
7. Mont Adventure Equipment (Mont) makes and sells sleeping bags, which are de signed to be both warm, and light-weight. The Brindabella sleeping bag is extremely warm (rated for −10?C), and weighs 1.5kg. The Warmlight sleeping bag is quite warm (rated for −7?C), and weighs 1.3kg. Assume the Brindabella is more profitable for Mont than the Warmlight. 
To exploit Menu Dependence, Mont is considering introducing a new sleeping bag type, the Kumquat, which is not very warm (rated for −2?C), and weighs 1.7kg. Assuming consumers desire warmth and low-weight in their sleeping bas, and do not care about price, the introduction of the Kumquat will allow Mont to exploit Menu Dependence to increase profits. 
8. Apple and Samsung are competing as duopolists in the smartphone market, each releasing a new smartphone each year. Apple and Samsung maximise the collective profit from the market by each producing half of the monopoly output of phones. Apple and Samsung can maximise their individual profit by each producing half the monopoly output of phones. 
9. Following the Australian bushfires in late 2019 and early 2020, many National Parks were closed for some months. This caused much higher usage rates in the remaining National Parks resulting in some congestion in those parks. The increased use, leading to congestion, means National Parks were best viewed as Common Resources, rather than Public Goods, during that time. 
10. Economic models can give no insight into real-world phenomena because the predic tions of the models do not exactly match real-world observations. 
Part B - 50 points Each question in this part is worth 25 points in total. Each question contains multiple sub-questions. As always, you must answer all questions to the best of your ability, and justify all responses. 
1. Two gambling firms, EvilCorp and BrokeLads, are deciding on their strategy for increasing profits this year. EvilCorp has decided to focus on traditional advertising, and is deciding between a huge advertising budget (H), a moderate advertising budget (M), or a low advertising budget (L). Brokelads has decided to focus on lobbying the government to reduce gambling restrictions, and has to choose between aggressive lobbying (A), passive lobbying (P), and no lobbying (N). 
Increased lobbying makes both firms better off. Increased advertising helps Evil Corp, and slightly harms Brokelads, as some gamblers switch companies. However, if there is both Aggressive lobbying and Huge advertising, then there will be public pushback against gambling, resulting in bad outcomes for both firms. The payoff for each firm depending on their own action, and the action of their opponent, is given in the matrix below. 
a) Find all Nash Equilibria for this simultaneous game. Explain why each is a Nash Equilibrium and briefly explain why there are no other Nash Equilibria. b) Suppose that, instead of acting simultaneously, EvilCorp advertises first, and Brokelads chooses it’s lobbying level only after seeing the advertising practices of EvilCorp. Draw the game tree for this sequential game. 
c) For the sequential game in part (b), find the unique Subgame Perfect Nash Equilibrium. 
d) For the sequential game in part (b), explain why the alternative strategy profile (L,(N, N, A)) (that is, the profile where EvilCorp has a Low advertising budget and Brokelads does Aggressive lobbying if EvilCorp has a low budget, and does No lobbying otherwise) is a Nash Equilibrium. Describe the non-credible threat being used in this strategy profile. 
e) Returning to the simultaneous game of parts (a) and (b); suppose the firms are not purely strategic players, but are level-k thinkers instead. Recall that a level-0 thinker would choose an action at random. (i) What would be the action of a level-1 player, and why? (ii) What would be the action of a level-2 player, and why? (iii) What would be the action of a level-3 player, and why? domestically produced rice pushing up the price of rice for domestic consumers. The government is considering three policies to lower the price faced by domestic consumers: (i) a tax firms must pay when they export rice, (ii) a subsidy to domestic consumers when they purchase rice, or (iii) doing both policies together. 
Suppose the autarky price for rice is $200 per tonne, while the world price is $350 per tonne. The government is considering a tax on exported rice of $50 per tonne, and/or a subsidy to domestic consumption of $50 per tonne. 
For the remainder of this question, please refer to the diagram

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