1. In the model of a dominant firm, assume that the fringe supply curve is given by Q= -1 + 0.2P, where P is market price and Q is output. Demand is given by Q = 11-P.
2. A selfless person approaches Jones and Smith with a $100 bill and offers to sell it to the highest bidder, but both the winning and losing bidders must pay her their bids. So if Jones bids $2 and Smith bids $1 they pay a total of $3, but Jones gets the money, leaving him with a net gain of $98 and Smith with -1. If both bid the same amount, the $100 is split evenly between them. Assume that each of them has only two $1 bills on hand, leaving three possible bids: $0, $1, or $2. Write out the payoff matrix for his game, and then find its Nash equilibrium.