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- Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. What is the size of this firm’s profit or loss? Will there be entry or exit? Will this restaurant’s demand curve shift left or right? In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm’s profit? Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. Is the deadweight loss for this firm greater than or less than $60Suppose that firms in an industry have identicalcost structures and the industry is in long-runequilibrium. Explain how the profit motive couldlead to lower market prices.Ch 24 Economics If there are two firms Atlas and Bowden in this market with the same earlier total cost function of TC = 500 + 10Q^2 , demand function of P(q)= 220-10q and they engage in Cournot competition, what is each firm's equilibrium quantity, price, and profit? [NB: round quantities to nearest integer to find equilibrium quantity, price, and profit
- 1.In differentiated oligopoly,the elasticity of individual market demand is smaller than in the case of pure oligopoly.Explain this statement in not more three sentences 2.As a prospective production manager of an agribusiness firm whose average variable cost of production is greater than the price per unit of its product in a competitive market indicate ,in not more than four sentences, how would you advice management concerning the operations of the firm 3.Assuming you are the production Economist in a farm firm whose elasticity of production is negative indicate,in not more than 3 sentences, how would you advice management concerning the operations of the firmQuestion 25 Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $60 million each. If they both advertise, they again split the market, but profits are lower by $20 million since each company must bear the cost of advertising. Yet, if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $70 million while the company that does not advertise earns only $30 million. What will these two companies do if they behave as individual profit maximizers? Both companies will advertise. Brown Inc. earns $40. Neither company will advertise. Brown Inc. earns $60. Both companies will advertise. PM Inc. earns $60. One company will advertise, and the other will not. Brown Inc. earns $70.7. find the amount of firms which exist in the industry for M = 2,4,6,8 Use a cournot model with linear demand and identical firms scaled by M Q(P) = M(D-P) TC(Q) = cQ+F D=6 c=2 F=2
- Q2. Which model's equilibrium price and quantity most closely matches perfect competition? a. Bertrand Competition with Identical Goods b. Stackelberg Duopoly c. Monopolistic Competition d. Cournot OligopolyThere are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for the services is ? = 2040 − 20?where quantity is measured in pave jobs per month and price, in dollars per job. The firms have an identical marginal cost of $200 per driveway. If the two firms collude, splitting the work and profits evenly, how many driveways will each firm pave, and at what price? How much profit will each firm make? Does Asphalt have an incentive to cheat by paving one more driveway each month? Show it numerically.In the accompanying figure, if output increases from Q1 to Q2, the firm:a. Decreases its marginal revenueb. Increases its marginal revenuec. It decreases its profitsd. It increases its profits.Please, for each of these alternatives, argue whether they are true, false or uncertain.
- Two ready-to-eat breakfast cereal manufacturers, Lots of Sugar and Buckets of Goo, face combined demand for their products given by Q = 75 - P. Their total costs are given by TCLots of Sugar = 0.1Q2Lots of Sugar and TCBuckets of Goo = 5QBuckets of Goo. If they successfully collude, their total profits will be: a. $62.50 b. $1,250.00 c. $125.00 d. $287.50 e. $1,287.50You are a profit-maximizing firm. Suppose there are two types of customers (50% of 1 type, 50% of the other) who shop in your specialty clothing store. Consumers of type R will pay __B= $80__ for a coat and __C= $ 60__ for pants. Consumers of type S will pay __D= $60__ for a coat and __E= $ 75__ for pants. Your firm faces no competition and but it does pay for the clothing, __F=$30__ per coat and __G= $ 50__ per pair of pants, i.e. MCcoat = __F= $30__ and MCpants= __G= $ 50__. You can’t price discriminate. You offer the same prices to all your customers.Suppose instead that you only offer a bundle of one coat and one pair of pants (which we would call a suit.) What is the profit-maximizing price to charge for the suit?Answer: Price for suit = $_______You are a profit-maximizing firm. Suppose there are two types of customers (50% of 1 type, 50% of the other) who shop in your specialty clothing store. Consumers of type R will pay __B= $80__ for a coat and __C= $ 60__ for pants. Consumers of type S will pay __D= $60__ for a coat and __E= $ 75__ for pants. Your firm faces no competition and but it does pay for the clothing, __F=$30__ per coat and __G= $ 50__ per pair of pants, i.e. MCcoat = __F= $30__ and MCpants= __G= $ 50__. You can’t price discriminate. You offer the same prices to all your customers.Answer True or False and then show or explain how you reached your conclusion.: Profits in Part (B) with bundling are higher than in Part (A) of this problem.Answer: ________________