. Consider a market that consists of 360 consumers, i = 1,..., 360, each with the following quasi-linear utility function Ui = M¡ + log xị over the numeraire good m (whose price is normalized to one) and x; units of good l; and 10 perfectly competitive firms, j = 1, ..., 10, that produce good l. Each firm j produces q; units of good l using c; (q;) = q² /2 units of the numeraire good. Consumers are price takers, and i's endowment of the numeraire good is wi, i = 1, ..., 360. (a) Derive the individual demand function, x; (p), and aggregate demand function, x (p), of good l. (b) Derive the individual firm supply function, q; (p), and aggregate supply function, q (p), of good l.
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- Suppose you are the economic adviser ofa company producing three brands of mobile pnones;Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units ofNokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing directorproposes an increase in price of Samsung X from e800 to e1000 per unit for which quantitydemanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unitfor which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 unitsUsing the mid-polint formula. compute the price elasticity of demand for each brand.From your answer in i, what is the type and economic interpretatiom of each brand'sii.value of elasticity.Suppose the following data represent the market demand for catfish: Price (per unit) $20 19 18 17 16 15 14 13 12 11Quantity demanded (units per day) 12 13 14 15 16 17 18 19 20 21Total revenue — — — — — — — — — —Marginal revenue — — — — — — — — — —Compute total and marginal revenue to complete the table above. At what rate of output is total revenue maximized? At what rate of output is MR less than price? At what rate of output does MR first become negative? Graph the demand and MR curves.Suppose a firm is operating in a competitive market and is maximizing profit by producing at thepoint where marginal revenue 5 marginal cost.Now suppose that consumer wealth decreasesin this market (and the good is a normal good).What might you expect to happen to the profitmaximizing output quantity for the firm?
- Consider a market where the inverse demand function is P = 400 – 20Q, where Q is the aggregate output. Assume there are three firms which compete à la Bertrand. a)What is the equilibrium price and the corresponding aggregate output if all firms have a constant marginal cost equal to 40? b)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 100? c)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 260?In Autarka there are 9600 people who like to visit an amusement park. Each of theseconsumers wants to visit one park once. The consumers' homes are evenly spaced acrossthe island, and they each suffer a disutility of $24 for each kilometre they travel to reachan amusement park. With their current technology, it costs an amusement park $12 for each customer theyhost. At present, the equilibrium price for an amusement park ticket is $36, and each firmhas a profit of $115,200. This market is best modelled as Hotelling competition. Fixed costs should be neglected. Treat this market as a one-shot game. Do not consider repetition or associated phenomena such as collusion or predatory pricing. Find the profit function for Bernice's Wild Rides. Assuming that Bernice's marginal cost is $12.In Autarka there are 9600 people who like to visit an amusement park. Each of theseconsumers wants to visit one park once. The consumers' homes are evenly spaced acrossthe island, and they each suffer a disutility of $24 for each kilometre they travel to reachan amusement park. With their current technology, it costs an amusement park $12 for each customer theyhost. At present, the equilibrium price for an amusement park ticket is $36, and each firmhas a profit of $115,200. This market is best modelled as Hotelling competition. Fixed costs should be neglected. Treat this market as a one-shot game. Do not consider repetition or associated phenomena such as collusion or predatory pricing. Derive an expression for the location of the indifferent consumer. Use PA to represent the price of admission at Alfonso's Wonderland, and PB to represent the price of admission at Bernice's Wild Rides.
- Jack is the owner of the only local bar in a small town.He sells whiskey in one-ounce glasses. For simplicity, let’s assume it doesn’t cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam’s demand function is yA = 16 – 2p, and Burt’s demand function is yB = 8 – p (price is measured in dollars and quantity is measured by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option?Jack is the owner of the only local bar in a small town.He sells whiskey in one-ounce glasses. For simplicity, let’s assume it doesn’t cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam’s demand function is yA = 16 – 2p, and Burt’s demand function is yB = 8 – p (price is measured in dollars and quantity is measured by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option? Answer Key that was given. I seems not to understand…The market for paperback detective novels is perfectly competitive. Suppose we have identical book readers, and each individual book reader's demand for paperback novels is given by P=95-2Q. We have 4 book readers in the market. What is the minimum Marginal Willingness to Pay for the book readers buying books when 34 books are bought in the market?
- A diner has no competition when it comes to it's famous reuben sandwich combo plate, for which the graph shows the diners demand (d), marginal cost (mc), and marginal revenue (mr), curves. The price of $20 is based on the mr = Mc rule for profit maximazation. The rectangular region shown represents the net revenue from sales of the sandwich (total revenue from reuben combo sales minus total variable costs associated with reuben combo sales). Now, suppose the diner decides to raise the price during the lunch hour, which accounts for 60% of reuben combo sales, knowing that it's lunch-hour patrons are the most loyal buyers of the reuben combo and also that they are locked into the lunchtime slot by their work schedules. The diner raises the price just enough not to lose any lunch-hour buyers. Use the area tool to outline the region representing the resulting additional net revenue from the price increases. Part 2: As a result of the revised price structure, the diners net revenue…Consider a “market” with differently substitute goods. Firms1 and 2 produce homogeneous goods, but firm 3 produces a differentiated (imperfectlysubstitute) good. Thus, the inverse demand functions for each of the firms are:P1 = 1 − 2q1 − 2q2− .5q3P2 = 1 − 2q2 − 2q1− .5q3P3 = 1 − 2q3 − .5q1− .5q2All firms have zero costs. They compete in quantities. We want to study this “market” todefine a relevant market as traditionally done by antitrust agencies, and to that end weare going to perform the SSNIP test. The question is whether the product offered by firm3 is in the same “market” as that offered by firms 1 and 2. Thus, we need to know if a“hypothetical” monopoly (or cartel) producing goods 1 and 2 would increase the price bya 5-10% at least. Thus,(a) let us first compute the prices in this “market” as it is. (You can use symmetrybetween firms 1 and 2, so that you expect q1 = q2, to speed up the computationof equilibrium outputs and prices.)(b) Now consider a hypothetical monopoly that…A7 You are the manager of a bakery that produces and packages gourmet muffins, and you currently sell muffins in packages of 3. A consultant’s report has estimated the (inverse) demand of a typical consumer to: P = 3 − 0.5Q If your cost of producing bran muffins is C(Q) = Q: (a) What is the marginal cost of muffins? (b) Draw the demand and marginal cost on a diagram. (c) Determine the optimal number of muffins to sell in a single package. (d) What price should the firm charge for each park?