3 The market demand for a product is given by Qd = 22 - P. Firm 1, the incumbent firm, and Firm 2 (potential entrant) face the following cost structures: C₁ = 20 + Q₁. and C₂ = 32 +2Q2. Sketch the analysis to be used to determine the maximum price that Firm 1can charge to deter entry by Firm 2. Please state your assumptions.
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- Suppose a manufacturer and its retailer face the problem of double marginalization. If the manufacturer sets the wholesale price equal to its marginal cost c and in addition, requires the retailer to pay a fraction α (between 0 and 1) of its profit. 4.a Write down the retailer’s profit maximization problem. Will this practice solve the double marginalization problem? (That is, will this practice maximize their joint profit?) 4.b Suppose the retailer is required to pay a fraction of α of its sales (i.e., total revenue). Write down the retailer’s profit maximization problem. Will this practice solve the double marginalization problem?Title 1. Two firms have costs of AC 1 = MC 1 = 20 and AC 2 = MC 2 = 16 respectively. Market demand is Q =. Description 1. Two firms have costs of AC1 = MC1 = 20 and AC2 = MC2 = 16 respectively. Market demand is Q = 1000 − 40P. a. Suppose irms practice Bertrand competition, that is, setting prices for their identical products simultaneously. Compute the Nash equilibrium prices. (To avoid technical problems in this question, assume that if irms both have the same price, then the low-cost irm makes all the sales.) b. Compute irm output, irm proit and market output. c. Is total welfare maximised in the Nash equilibrium? If not, suggest an outcome that would maximise total welfare, and compute the deadweight loss in the Nash equilibrium compared with your outcome.1. Two firms compete in a market to sell a homogeneous product with inversedemand function P = 960-6Q. Each firm produces at a constant marginal cost of$60 and has no fixed costs.a. Assuming perfect competition, computei. Equilibrium price and quantityii. Profits and producer surplusiii. Consumer surplus and total surplusb. Assuming Cournot duopoly, computei. Reaction functions for each firmii. Profits of each firmiii. Consumer surplusiv. Total welfare loss relative to perfect competition (if any)c. Assuming the firms collude and act as a monopolist, computei. Equilibrium price and quantityii. Total profitsiii. Consumer surplusiv. Total welfare loss relative to perfect competition (if any)d. Rank the output quantities, profits, and total welfare by the three marketstructures above
- 1) Suppose the marginal cost of contract provisions is MC = 2Q where Q is the quantity of contract provisions in given contract. The marginal benefit for a contract with a suppliers is MR = 60-Q. The buying firm does not want more than 25 provisions in the contract. What is the optimal number of contract provisions? a. none of the available options. b. 0 becuase the firm will vertically integrate. c. 20. d. 15. 2.) Reconsider the question above. If COVID 19 is causing increased uncertainty in the suppliers ability to provide what the buying firm wants, the MB of contracting increases to MB = 78-Q. The resulting number of provisions will now be a.0 because the firm will vertically integrate. b. 13. c. 26 d. none of the available options.Part d please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…COURSE: MICROECONOMICS - Cournot Model:In the market for a given good there are only 2 firms satisfying the demand, and their respective total cost functions respond to the form: CTi = 10Qi + 5 and the demand is estimated to be: P = 31 - QIf the decision variable for both firms is that the quantity they will produce and realize will be decided simultaneously it is asked to:(a) calculate the profit and reaction function of each firmb) graph market equilibriumc) calculate the profits that both companies will obtain in equilibrium
- Part b please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices. (c) Now suppose firms choose quantities, instead of prices. Obtain the equilibrium choices1.-There are only two firms in the market, Firms A and B, producing differentiated products. Specifically, the demands for the two firms' products are given by qA = 30 − 2pA + pB and qB = 15 − 2pB + pA, where pi denotes the price charged by Firm i and qi denotes the resulting number of units that will be purchased from Firm i. Each firm can produce as much as it chooses, at zero marginal cost. The firms compete with one another in prices. (a) Draw the two firms' reaction functions in a diagram with p1 and p2 on the axes. (b) Determine the equilibrium prices and quantities.
- Part c please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…Question AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. a. What is the market structure of AVAC? State its characteristics. b. To maximize profit, What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? If this number of packs is produced and sold, what will be the firm’s monthly profit? c. Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph. d. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal…Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.
