Question

TRUE / FALSE + (explanation)

Please answer whether a statement is true or false and give a 1-2 sentence explanation of why this is the case.

1.1 Firms do not reap the benefits of their positive externalitiesso they always produce too little.

1.2 In a static game, Nash Equilibrium are always subgame perfect.

1.3 Risk averse individuals never prefer a lottery over a sure bet.

1.4 Product differentiation makes consumers and producers better off.

- Thank you!

Answer 1

Answer :-

1):- True

Because if there should be an occurrence of positive externality, the product will in general have the positive overflows (External advantage).

For which the makers are not paid , in this manner they produce not exactly socially Optimal level.

2) :- True

Since game isn't dynamic , its not played for in excess of a period , along these lines NE is itself SPNE.

3):- True

Risk averse Individuals prefere a definite sum over a questionable lottery.

4):- True

Product Differentiation gives the makers an imposing business model power, power to set the costs

Consequently they are in an ideal situation.

While consumers gain admittance to Increased assortment of goods, consequently they also gain from Product differentiation.