2026, Question 1 · Long · 10 points · about 25 minutes
Steel duopoly game that becomes a monopoly
Use a payoff matrix for two steel makers to find a best response, test for a dominant strategy, and name the Nash equilibrium, then redraw the matrix after a cost increase. After the firms merge, graph the profitable monopoly with its deadweight loss and predict how a lump-sum tax affects its price.
Lessons this question draws on
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Scoring guidelines (PDF, page 2)
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