Supply Cost Of Producing Vitamin D And Act As A Monopolist

1114 WordsJan 5, 20165 Pages
1. The accompanying table shows the demand schedule for Vitamin D. Suppose the marginal cost of producing Vitamin D is zero
 2. Price of Vitamin D 3. Quantity of Vitamin D 4. $8 5. 0 6. $7 7. 10 8. $6 9. 20 10. $5 11. 30 12. $4 13. 40 14. $3 15. 50 16. $2 17. 60 18. $1 19. 70 20. 
 a) Suppose that company A is the only producer of Vitamin D and act as a monopolist. Suppose the company produces 40 units of Vitamin D at $4/unit. If the company decides to produce 10 units more, what is the price effect? What is the quantity effect? Would the company then have an incentive to produce 10 more units? Price Effect: If A yields 10 more units of Vitamin D, totaling 50 units, then the…show more content…
There is no change to Company A’s cost since the marginal cost is zero. Since producing 10 additional tons raises Company A’s revenue by $10, Company A does not have an incentive to produce 10 additional tons. 21. Suppose that there are two fishing companies who are behaving non-cooperatively. Assume that the two sides can send out 1 or 2 fleets each; and the more fleets in the area. The more fish they catch, but the lower the catch of each fleet. The matrix below shows the profits per week earned by the two sides Company 2 2 fleet Company 1 1 fleet 10,000 / 10,000 4,000 / 12,000 2 fleet 12,000 / 4,000 7,500 / 7,500 a) What is the non-cooperative Nash equilibrium? Will each side choose to send out 1 or 2 fleets? One company (Company A) will have a higher profit if it sends out two fleets ($12 000) rather than $10 000) if the other company (Company B) has only one fleet. If Company B sends out two fleets, Company A will have a higher profit if it also sends out two fleets ($ 7 500 rather than $4 000). The same thinking will affect Company B’s best strategy which is to send out two fleets regardless if company A will send out one or two. They will only have a profit of $7 500 instead of having a profit of $10 000 if they will both choose to send out two fleets instead of one only b) Suppose that fish stocks are getting depleted. Each side

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