Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the cost of a crucial input used in producing these goods has increased. As a result, both of the firms are considering increasing the price of the good to $6. If the firms do not raise their prices at the same time, the firm that raises the price stands to lose market share. The payoff matrix shows their respective payoffs on the basis of the prices charged by each. Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Firm 2
price $5 price $6
50 100
Firm 1 price-$5 50 0
price $6 0 40
100 40
Refer to the scenario above. Which of the following is true?
A. The dominant strategy equilibrium is the Nash equilibrium.
B. This game does not have a Nash equilibrium.
C. Nash equilibrium occurs if Firm 1 charges a price of $5 and Firm 2 charges a price of $6.
D. Nash equilibrium occurs if Fim 1 charges $6 and Firm 2 charges $5.

5. profit maximization and shutting down in the short run suppose that the market for polos is a competitive market. the following graph shows the daily cost curves of a firm operating in this market. 0 2 4 6 8 10 12 14 16 18 20 50 45 40 35 30 25 20 15 10 5 0 price (dollars per polo) quantity (thousands of polos) mc atc avc for each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the previous graph to identify its total variable cost. assume that if the firm is indifferent between producing and shutting down, it will produce. (hint: you can select the purple points [diamond symbols] on the previous graph to see precise information on average variable cost.) price quantity total revenue fixed cost variable cost profit (dollars per polo) (polos) (dollars) (dollars) (dollars) (dollars) 12.50 135,000 27.50 135,000 45.00 135,000 if the firm shuts down, it must incur its fixed costs (fc) in the short run. in this case, the firm's fixed cost is $135,000 per day. in other words, if it shuts down, the firm would suffer losses of $135,000 per day until its fixed costs end (such as the expiration of a building lease). this firm's shutdown price—that is, the price below which it is optimal for the firm to shut down—is per polo.