Question

Q19) Determine the sign of the term $\frac{\partial m_1}{\partial q_1}\frac{\partial q_1(K_1)}{\partial K_1}$ A) The term is equal to zero. B) The term is positive. C) The term is negative. Q20) Determine the sign of the strategic effect $\frac{\partial m_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$ A) The term is equal to zero. B) The term is positive. C) The term is negative. Instead, suppose firm 1 chooses its investment $K_1$ at the first stage of the game to accommodate entry. As such, $K_1$ is chosen to maximize firm 1's profit, which can be written as $\pi_1 = p(q_1(K_1), q_2(K_1))q_1(K_1) - c(q_1(K_1), K_1)$. Taking the total derivative of firm 1's profit with respect to $K_1$ leads to $\frac{d\pi_1}{dK_1} = \frac{\partial \pi_1}{\partial K_1} + \frac{\partial \pi_1}{\partial q_1}\frac{\partial q_1(K_1)}{\partial K_1} + \frac{\partial \pi_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$ Q21) Determine the sign of the strategic effect $\frac{\partial m_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$ A) The term is equal to zero. B) The term is positive. C) The term is negative.

          Q19) Determine the sign of the term $\frac{\partial m_1}{\partial q_1}\frac{\partial q_1(K_1)}{\partial K_1}$
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.
Q20) Determine the sign of the strategic effect $\frac{\partial m_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.
Instead, suppose firm 1 chooses its investment $K_1$ at the first stage of the game to accommodate entry. As such,
$K_1$ is chosen to maximize firm 1's profit, which can be written as $\pi_1 = p(q_1(K_1), q_2(K_1))q_1(K_1) - c(q_1(K_1), K_1)$.
Taking the total derivative of firm 1's profit with respect to $K_1$ leads to $\frac{d\pi_1}{dK_1} = \frac{\partial \pi_1}{\partial K_1} + \frac{\partial \pi_1}{\partial q_1}\frac{\partial q_1(K_1)}{\partial K_1} + \frac{\partial \pi_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$
Q21) Determine the sign of the strategic effect $\frac{\partial m_1}{\partial q_2}\frac{\partial q_2(K_1)}{\partial K_1}$
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.

Q19) Determine the sign of the term (∂ m1)/(∂ q1)(∂ q1(K1))/(∂ K1)
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.
Q20) Determine the sign of the strategic effect (∂ m1)/(∂ q2)(∂ q2(K1))/(∂ K1)
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.
Instead, suppose firm 1 chooses its investment K1 at the first stage of the game to accommodate entry. As such,
K1 is chosen to maximize firm 1's profit, which can be written as π1 = p(q1(K1), q2(K1))q1(K1) - c(q1(K1), K1).
Taking the total derivative of firm 1's profit with respect to K1 leads to (dπ1)/(dK1) = (∂π1)/(∂ K1) + (∂π1)/(∂ q1)(∂ q1(K1))/(∂ K1) + (∂π1)/(∂ q2)(∂ q2(K1))/(∂ K1)
Q21) Determine the sign of the strategic effect (∂ m1)/(∂ q2)(∂ q2(K1))/(∂ K1)
A) The term is equal to zero.
B) The term is positive.
C) The term is negative.

Added by Christopher C.

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