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- May and Raj me the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the com. If they work independently, they will each earn 100. If they decide to work together and both lower their output, they call each earn 150. If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn 200. Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoners dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Rajs earnings first, and Marys earnings second.)Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
- Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…Firms can choose a location in the linear city of length 1 with fixed cost of 25. Consumer density at any location x in the linear city is 400. a) Show that a firm each at 0.125, 0.375, 0.625 and 0. 875 is not an equilibrium. b) What is the equilibrium number of firms and th6ir locations? c) Illustrate how entry is no longer profitable at equilibrium? Plz do fastFood prices in sports stadiums are notoriously high because there is a limit on the numberof vendors that can operate in the stadium, which is a barrier to entry. In 2017, the AtlantaFalcons, an American football team, lowered the barriers to entry by allowing more foodvendors into their stadium. If the market for food in the stadium follows our perfect marketassumptions, what might you expect happened after this change? Do not worry about theunderlying facts of each statement, only whether it makes economic sense given our model.(Select one or more.)(a) The price of food in the stadium decreased because of an increase in supply.(b) The price of food in the stadium decreased because of an increase in demand.(c) The quantity of food sold decreased because of a movement of the supply curve.(d) The quantity of food sold increased because of a movement along the demand curve.(e) Profit per vendor decreased because of lower food prices.(f) Profit per vendor increased because of greater…
- A) Suppose that Quinoa is produced with labor (L) and land (K). The markets for labor, land, and quinoaare all perfectly competitive, but the supply of labor and land are both upward sloping (i.e. not perfectlyelastic). As a result, the long-run industry supply curve for quinoa is upward sloping.i) Is producer surplus positive or zero in the long-run?ii) If all firms producing quinoa have identical production technology, do quinoa producers earn aprofit in the long-run?iii) In the long-run, where does producer surplus go in the quinoa market? B) Suppose the market for shoelaces is perfectly competitive and all firms have identical productiontechnology. If short-run profits for shoelace manufacturers are positive, what will happen to the supplyof shoelaces in the long-run? The price of shoelaces?In Brazil, coffee beans are cultivated by a very large number of small farms that all produce beansof similar quality and taste at similar costs. Land is still plentiful, and the equipment required isaffordable enough to allow new farming businesses to start up under current market conditions.However, better production techniques, especially alternatives to polluting fertilisers anddeforestation, are needed in this industry. Using the theory and models of industry structure, examinethis industry. Should government be worried about any aspect of how an industry with this marketstructure will perform?Return to Figure 9.2. Suppose P0 is $10 and P1 is$11. Suppose a new firm with the same LRAC curve asthe incumbent tries to break into the market by selling4,000 units of output. Estimate from the graph what thenew firm’s average cost of producing output would be.If the incumbent continues to produce 6,000 units, howmuch output would the two firms supply to the market?Estimate what would happen to the market price as aresult of the supply of both the incumbent firm andthe new entrant. Approximately how much profit wouldeach firm earn?
- COURSE: MICROECONOMICS - Bertrand's ModelAssume that a market is supplied by 2 companies, whose total costs are: CTi = 100Respective demand of each is: q1 = 120 - 2p1 + p2 and q2 = 120 - 2p2 + p1It is requested to:(a) calculate the firms' profit and reaction function.(b) plot the market equilibrium price and reaction function(d) calculate equilibrium quantity produced by each firm(e) determine profits that both firms will have at equilibrium.Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?A) Information products are generally considered non-rival goods. What does this mean in terms of the cost structure of the producer?B) Why will products with this kind of structure not get produced by competitive markets? C) Given the above two points, what can producers do to produce profitably in this kind of market?