1) Obtain the reaction function of the first firm. (2) Find the equilibrium (output and profit of each firm) when two firms simultaneously compete
Q: Market concentration measures fail to accurately assess the industry's market power. Why?
A: The number of businesses that sell or market a particular item or line of items along with the…
Q: Allegiant Airlines is considering an overbooking policy for one of its flights. The airplane has 50…
A: To find the average net profit of provided limits we need to find the expected level of reservations…
Q: Suppose that the price of health care services rises and the quantity demanded falls. Under what…
A: Share of healthcare share as a percentage of GDP can be written as: = (Value of healthcare services…
Q: Explain how adverse selection leads to market failure. Give a hypothetical example/situation.
A: Moral hazard arises when one party is willing to take on more risk in order to receive more rewards,…
Q: Ernesto borrowed P30,000 from a bank and promised to pay the amount for 1 year. The bank discounted…
A: A discounted loan is a loan in which the interest amount is deducted at the time of the loan made…
Q: Suppose that for a monopolist, MR=MC=$10 and P=$15 at the profit-maximizing level of output. At this…
A: Profits are the monetary value that a firm earns above the total cost.
Q: 1. is a theory of oligopoly in which oligopolistic firms act as if there were is an organization of…
A: Oligopoly is a market structure in which there are few large firms in the market. The presence of…
Q: dr. phelps (Edmund Phelps) claims the US is becoming more corporatist -- which of the four models…
A: Let’s first understand the term Market Structure: “Market Structure” in simple terms refers to a…
Q: Identify whether or not each of the following scenarios describes a competitive market, along with…
A: The following are the characteristics of a competitive market: There are many buyers and sellers.…
Q: Consider three inputs of production: labour, physical capital and natural resources, and an economy…
A: Decreasing return to scale is when the increase in input will increase the output but the increase…
Q: alculate the average total, fixed, and marginal costs for a “competitive” firm with the following…
A: Given The average total cost is the cost per unit of production. Average fixed cost is the fixed…
Q: Suppose that You Yeet is one of over a dozen competitive firms in the Bloomington area that offers…
A: A perfectly competitive firm is a price taker, which means price is determined by the market forces…
Q: About increasing food prices in the Agriculture Industry, what are farmers’ interests and level of…
A: The farmer's main goal is to make the most revenue as possible from his crop, which often translates…
Q: Say you are part of the government and found that there is a presence of a cartel; explain the…
A: An official agreement between a group of the producers of an goods or service to control the usual…
Q: If P5,000 is invested for 10 years with an interest rate of 8%, compounded quarterly, what will the…
A:
Q: Mr. Toni bought a plot of land for investment. The following the following functions: V(t) = 100et…
A: A plot of land is bought by Mr. T for investment purposes. The value of that plot continues to…
Q: discuss the Fiscal policy of Demand Side and Market-oriented and Interventionist policies of the…
A: Interventions: It refers to the government process that helps the market failure to get clear. It…
Q: P Price E C D I B A Quantity Which of the following portrays the original Consumer Surplus before…
A: Consumer surplus is the difference between the price that the consumer is willing to pay and the…
Q: Discuss gains from international trade in the presence of heterogeneous firms in a monopolistically…
A: International Trade is defined as the exchange of goods and services among two or more nations.…
Q: What entity decides what the reserve requirement is?
A: Reserve requirement is the monetary amount that commercial bank has to keep with the federal Bank as…
Q: 2) The AD-AS diagram features a LRAS curve and an AD curve. An example is below. Suppose in this…
A: In simple terms, aggregate demand refers to total spending. In a dynamic model, aggregate demand…
Q: Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):…
A: Abatement costs are what it costs to lessen environmental problems like pollution. The economic…
Q: Given equation and questions I need answered are attached. Below are the answers to previous…
A: Given information: Q = 220 - P ---------> Demand equation STC = 1000 + 80Q - 3Q2 + (1/3)Q3…
Q: 0 1 2 3 4 Total Product 5 6 Total Fixed Cost Total Variable Cost 165 Total Cost STC Q SAC = AFC +…
A: Total cost is the sum of fixed cost and variable cost. Fixed costs are the costs thet doesn't…
Q: Otis borrowed $1,610 today and is to repay the loan in two equal payments, one in 6 months and the…
A: A loan is an agreement between two parties where one party gets a set amount from the other party in…
Q: OAX-0 O&Ps-Ps OC04.05 0000-04
A: The price of a good in any market is determined by the interaction of demand and supply. However,…
Q: 29. Company X has been contracting its overhauling work to Company Y for $40,000 per machine per…
A: Company Y cost of overhauling = 40,000 Costs associated with building facility - Initial Cost =…
Q: T or F Employing economic cost/profit instead of accounting cost/profit when making business…
A: Profits are the company's earnings that remain after all costs are taken into account. The term…
Q: EXERCISE 3 If Joe decides to allocate his entire weekly allowance between energy drinks and coffee,…
A: Budget Constraint is a function of good's prices and the income level . Budget Constraint : Income…
Q: ecognize why economists believe that economic problems such as “shocks” and “sticky prices” are…
A: The stability of GDP is one of the primary attributes of economic growth. But, often GDP fluctuates…
Q: Ravi has £21 to spend on pastries and biscuits. If he spends all the money on pastries, he can…
A: Budget constraint shows the expenditure on each good when the income of the consumer and prices of…
Q: 1 Using an appropriate demand and supply diagram, explain the impact on the market price and…
A: The Samsung digital cameras if followed with new technologies will lead to an increase in the supply…
Q: Environmental health is what
A: Public health is a discipline that deals with the concepts, terminologies and activities related to…
Q: What is the advantage of monetary policy over fiscal policy? O. Monetary policy can be implemented…
A: The policy that is related to taxes and government spending is known as fiscal policy. The policies…
Q: 26. In order to derive the equation for the Phillips curve we assumed that the expected inflation…
A: The Phillips curve shows that unemployment and inflation have a consistent negative relationship.…
Q: What is meant by the tax subsidy of employer-paid health insurance? Explain why the subsidy very…
A: Tax subsidy is defined as a reduction on the tax burden which is provided to an individual or a firm…
Q: fewer sellers in the industry relative to the long-run equilibrium amount. Now consider the long run…
A: A monopolistically competitive firm produces at the intersection of MR and MC to maximize profit (or…
Q: Given: Desk purchased January 10 for $3,000; 8-year useful life; $600 salvage value. Calculate…
A: Given Purchasing price or basis (B) =$3000 Useful life =8 year Salvage value =$600 Depreciation…
Q: Given the utility function U= 0.4* X₁, 0.25 * X2, 0.35 * X3 and income M = 300, how much will the…
A: Optimal consumption bundle: The optimal consumption bundle is such that at that bundle the…
Q: An article in the Wall Street Journal in 2020 noted that "The U.S. Treasury Department dropped its…
A: Anything that is commonly acknowledged to be valuable and may be used as a means of exchange to…
Q: A firm's cost function is C(x) = 300lnx, determine and interpret the marginal cost of the firm when…
A: Given information: C(x) = 300 ln(x) ----------> Cost function. Where 'x' is the output…
Q: A competitive firm produces a product using the function f(x1,x2)=8x1/21x1/22f(x1,x2)=8x11/2x21/2.…
A: f(x1,x2) = 8x1x2p1=$2.50p2=$4Sub to: C = 2.5x1+4x2
Q: Explain how adverse selection leads to market failure. Give a hypothetical example/situation.
A: Market failure is the economic conditions described by an inefficient distribution of products and…
Q: Assume that the market for oranges is perfectly competitive. Carmen is an orange producer and her…
A: Shut down refers to the situation under which the firm temporarily closes it production activities…
Q: (1 point) The demand function for a certain item is x = (p+2) ³e P Use interval notation to indicate…
A: The elasticity of demand is given by: E=dxdppx Elasticity measures the sensitivity of quantity…
Q: (Cooperation in ER systems) Suppose Latvia and Denmark both peg their exchange rates to the Euro.…
A: A currency peg is a strategy used to stabilize currency exchange rates between nations by having a…
Q: Suppose the Federal Government issues $100 worth of food stamps to everyone in your city. These…
A: The line that shows the different combinations of goods that consumers can afford is called the…
Q: What is the significance of the concept of rational ignorance? Question options: It explains…
A: Voting is a method of determining the decision of the majority of people. Voting may give…
Q: 1. Conditions for monopolistic competition The following question asks you to analyze the…
A: Perfect competition: A firm in the competitive market is a price taker because it has large number…
Q: Which one of the statements is FALSE in Paris Agreement? Select one: O a. Developed countries must…
A: The Paris agreement is an agreement on climate change. It was formed in order to limit/reduce global…
There are two firms in the market (duopoly). These two firms are competing
simultaneously. The first firm chooses its output level (x) by predicting the second firm’s
output (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assume
that the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reaction
function of the first firm. (2) Find the equilibrium (output and profit of each firm) when
two firms simultaneously compete
Step by step
Solved in 2 steps with 2 images
- Consider Hotelling's model (a street of length one, consumers uniformly distributed along the street, each consumer has a transportation cost equal to 2t, where t is the distance traveled). Suppose there are two gas stations, one located at 1/4 and the other located at 1. (a) Calculate the demand functions for the two firms. (b) If the two gas stations compete in prices and settle at a Nash equilibrium, will they charge the same price for gasoline? (assume that production costs are zero, that is, firms maximize revenue).Consider a quantity-setting duopoly. The two firms are Alpha, Ltd. and Beta, Inc. The demand schedulein this market is: p Qd180 150155 175130 200Each firm has a constant marginal cost of 30 per unit. Suppose each firm can choose to produce either 75units or 100 units. Firms make their quantity choices simultaneously and the market price is whatever itneeds to be to sell the total output in the market.(a) Draw up the normal form game matrix, showing the players, strategies, and payoffs. Show your workdetermining the profits in each box in the matrix.(b) Determine the Nash equilibrium of this game.(c) Suppose the firms were able to come to an agreement to make more profit. What would this agreementbe?(d) Explain how the government might respond to such an agreement and why.Consider a quantity-setting duopoly. The two firms are Alpha, Ltd. and Beta, Inc. The demand schedulein this market is:p Qd180 150155 175130 200Each firm has a constant marginal cost of 30 per unit. Suppose each firm can choose to produce either 75units or 100 units. Firms make their quantity choices simultaneously and the market price is whatever itneeds to be to sell the total output in the market.(a) Draw up the normal form game matrix, showing the players, strategies, and payoffs. Show your workdetermining the profits in each box in the matrix.(b) Determine the Nash equilibrium of this game.(c) Suppose the firms were able to come to an agreement to make more profit. What would this agreementbe?(d) Explain how the government might respond to such an agreement and why
- 1. Consider an industry with inverse demand given by p = 8 – q, where p is the price, and q is the quantity. There is one incumbent firm and one potential entrant. In the first stage of the game, the incumbent chooses its quantity qi. In the second stage, the potential entrant observes qi and chooses its quantity Ce. The potential entrant can also decide not to enter the market. The production technology of both firms are represented by the cost function C = 2q. To enter industry implies a fixed entry cost of F. (a) Find the equilibrium of the game, assuming that the potential entrant enters the industry. What are the profits of firms? (b) Assume that entry is not blockaded. For which values of F does the incumbent firm prefer to deter entry? (c) For which values of F, entry blockaded?Two identical firms are engaged in Cournot competition, with cost functionsTCA(QA) = 10 QA and TCB(QB) = 10 QB. The market demand is given by P = 610 –2Q.a) Plot the best response functions and report the Cournot-Nash equilibrium quantities, price and profits.b) What are the prices, quantities, and profits for the firms if they decide to collude and share profits equally? c) Show that firms have an incentive the deviate from the collusive outcome.d) Find the Stackelberg equilibrium if A leads and B follows.e) Show the equilibria in the previous parts on the inverse demand function. Calculate and identify consumer surplus and deadweight loss in each equilibrium..The marginal cost of a product is fixed at MC = 20. The demand for the product is Q = 100 - 2P. (a) Now consider a Cournot model with two firms that are choosing quantities simultaneously. What is the best reply (best response) function for each firm? What is theNash equilibrium? What is the total surplus? (b)What do you expect the total surplus would be with three firms? Why? (You do not need to calculate an exact value. You can say ”total surplus is at least 100”, or ”total surplus is at most 80”)
- Why can Q-learning sustain collusion? a. Because collusion maximizes firms' profit. b. Because collusion is the Nash equilibrium of the pricing game, even if it is played only once. c. Because the algorithm takes into account future profits, and learn that price cutting today will lead to price war tomorrow. d. Because firms use the algorithm to communicate with each other and sustain collusion. 21 Suppose a platform tries to recommend the best movie to Ann and Ben. Movie 1's quality is uniformly distributed from 0 to 1. Movie 2's quality is uniformly distributed from 0.5 to 1. Suppose the platform recommends a movie to Ann and Ben at the same time. What are the expected quality of movie 1 and 2, and which one should it recommend? a. 0.5, 0.5, movie 1. b. 0.75, 0.5, movie 1. c. 0.5, 1, movie 2. d. 0.5, 0.75, movie 2.The total cost for a product-testing firm is C(q)=70 + 20q2 q= number of products tested Price of a product = average cost Each corporation purchases one product test per year from a product-testing firm in the same city. All other inputs are ubiquitous. Suppose five corporations are initially distributed uniformly, with one corporation in each city (A,B,C,D,E). Is the initial distribution a Nash Equilibrium? Demonstrate it is not by finding how much one corporation would pay if they deviate and move to another city? What is the average price of having two tests conducted? (Which is the price that the corporation would pay if they "live" in a city where two tests are conducted) The average price of moving and thus, having two tests is: $_____Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each earn as profit? How does the price compare to the marginal cost? Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each…
- We now consider a duopoly model where the firms offer products with different qualities and consumers differ from each other in how much they care for quality. Suppose the firms offer their products with quality si ∈ [0,1] and consumers’ ‘location’ in terms of how much they care about quality is given by a parameter θ ∈ [0,1] and consumers are uniformly distributed over this interval. Suppose the firms first choose their quality s1 and s2 and then set prices p1 and p2. A consumer of type θ derives utility vi = r − pi + θsi from consuming a unit from firm i and where reservation price r is high enough that everyone purchases from one of the two firms. Suppose the marginal cost of producing increases with quality. There are no fixed costs and the total variable cost is C(qi,si) = csiqi so that marginal cost is csi and increases with quality. Further, let c = 1 so marginal cost is si. Consider the second stage where given a choice of qualities s1 and s2 with s1 < s2, the firms…Suppose two Bertrand competitors, F1 and F2, make identical products for a market with inverse demand P = 600 – 0.5Q. Both firms have the same costs Ci = 20qi, and each firm has sufficient capacity to supply the entire market. a. What prices will the firms choose? How much might each produce and what profit would they make? Is the result a Nash equilibrium? Explain. b. Suppose F1 improves its efficiency, reducing its cost to C1 = 16q1. What will happen in this market? Explain. c. Assume now that the firms have their original identical costs, but that F1 has only 100 units of capacity and F2 has only 200 units of capacity. What prices will the firms choose now? Explain why neither firm will want to decrease its price at the equilibrium you identify. Why would neither firm want to increase its price? Prove this for F1.Three firms compete in the style of Cournot. All firms have a constant returns to scale technology: There are no fixed cost and each firm's marginal cost is constant. The market demand is given by Q(P) = 9 - P. Firm 1's marginal cost is MC1 = 1, firm 2's marginal cost is MC2 = 2. Let MC3 be the marginal cost of Firm 3. Which of the below is a necessary condition so that q > 0 for all three firms in a Nash equilibrium? a. MC3 < 1 b. MC3 < 4 c. MC3 < 3 d. MC3 > 1 e. MC3 < 2
