2. Suppose that in a small town, the market for cement had five companies with market shares 0.3, 0.2, 0.2, 0.2, and 0.1. The following year, a new firm entered but the leading firm increased its share. Now the shares are 0.5, 0.1, 0.1, 0.1, 0.1, and 0.1. Did the market become more competitive or less competitive?

3. If you were playing a game of Stag Hunt, would you rather play the simultaneous version of the game or the sequential version? Why?

4. Explain the Bertrand paradox. How does it inform our explanations of market power in industries with a small number of firms?

6. Suppose a market has a Herfindahl index of 0.1. Should we expect this market to be fiercely competitive? Does this imply efficiency?

8. Suppose an industry has three identical firms competing on quantities with demand P = 100 - 20 and constant marginal costs of MC = 1. What are the firms' best response functions?

9. What could lead the firms in question 8 to have asymmetric best response functions? What assumption(s) would have to change?

11. The labor supply curve is the relationship between the wage level and the quantity of labor that workers are willing to provide. Why is applying the usual ceteris paribus assumption more complicated in this case than when we use apply it to the product market?

12. What factors do economists suppose influence the amount of education people choose to obtain? If the decision were based entirely on material considerations, how would people decide how much education they should get? Can you think of events that could influence this decision?

1 a) Calculate u (0.6X € 0.4Y, 0.7A Ⓒ 0.3B) [NOTE: Understanding notation, i.e., what you are asked to calculate, is a part of the problem] (b) List all best response strategies of the Row player to Column playing X.