Assume that there are two firms in a market with inverse demand function P(Q) = 120-Q. Both firms have identical marginal costs of 20 and they compete over prices. Assume that a third firm enters the market with the same marginal costs. Describe how the consumer surplus changes. Stays the same O Increases Decreases
Q: Assume that household 1 and household 2 has the following demands for education (a private good) (in...
A: Consumers' willingness to buy products and services at certain pricing is referred to as demand. Mar...
Q: Consider the following payoff matrix. -1 P = 0 -1 (a) Find the optimal mixed row strategy. (b) Find ...
A:
Q: e. Trade Representative: "In an open economy with international trade, government spending is much m...
A: The only difference between the open economy and closed economy is that the open economy make trade ...
Q: The M2++ and M3 definitions of the money supply include financial assets... O a. Such as a credit ca...
A: The total volume of money that is being held by the public at a specified period in an economy is kn...
Q: Please define the long cost curve and the short run cost curve in your own words but not more than 1...
A:
Q: 2. Consider a competitive market where there are two types of firms, Type A and Type B, with total c...
A:
Q: 1. You work for a beer company. Your boss wants to increase yearly sales by 5000 liters. To reach th...
A: 1) It is given that the price and the demographic composition of market is constant. Hence these two...
Q: QUESTION 32 Reasonable uses of debt include all the following EXCEPT O a. to purchase a car. O b. to...
A: Debt basically refers to the amount that is taken by an businesse organization for some duration of ...
Q: 2. Three mutually exclusive design alternatives are being considered. The estimated sales and cost d...
A: Annual Worth (AW) Analysis is characterized as the same uniform annual worth of all assessed receipt...
Q: In the neoclassical growth model, a ceteris paribus decrease in the population eventually results in...
A: GDP is the sum of all activities happening in the economy. So if population will increase demand for...
Q: 3.a. Regrading the expected price, choose the correct math symbol below. PE ( ) 10 3.b. The actual...
A: Solving the question as per the given graph, where Long run and short run aggregate supply meet wher...
Q: Suppose that the total cost of manufacturing r units of a certain commodity is C(x) = 2r + 6.r + 12....
A: Note: We will answer the first one as the exact one was not specified. Please submit a new question ...
Q: when it appeared the conventional Open Market Operations was not sufficient, monetary policy officia...
A: Monetary policy is a set of tools that a country's central bank can use to encourage long-term econo...
Q: b) Given that nothing else is borrowed in the near future, the length of time it will take a governm...
A: Government debt Government Debt is a concept that has been for a long time and will continue to exis...
Q: Suppose you have an exponential utility function given by U(x) =1 - exp(-x/R) where, for you, R = 10...
A: The quantity of assets that makes a person hesitant to gamble/invest or refrain from participating i...
Q: ee is $4. 1. The money supply per person is $2000. What is the value of the nominal interest rate? W...
A: Calculation interest rate of equilibrium:- Formula is :- TC = (I*Y/2N) + F*N Here, Total Cost = F*i ...
Q: Flow 1 Flow 2 A Flow 3 B Flow 4 Refer to the diagram. (There are a couple of lines missing. It shoul...
A: The correct option is A.
Q: 6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand d...
A: Required reserve is the ratio of total deposit of commercial bank that need to be kept with Central...
Q: What are the advantages and disadvantages of division of labour?
A:
Q: From Adam Smith's Wealth of Nation , What is the “great enemy” of the economy (hint: not government)...
A: In the wealth of nation, Adam Smith says that free market forces produce the maximum or optimal resu...
Q: How does tax affect a firm's fixed, marginal and average costs? 1. When firm must pay lump sum tax (...
A: The tax is divided into the two parts : Lump sum tax and specific tax or per unit tax. Lump sum tax ...
Q: Demand for high-end purses in a town is given as P = 600 – 0.01Q², and supply is given as P = 100 + ...
A: Given information Demand function P=600-0.01Q2 Supply function P=100+0.04Q2
Q: the long-run equilibrium, all firms in a perfectly competitive market earn zero economic profit. Exp...
A: In a perfectly competitive market there are large number of firms producing similar and identical pr...
Q: 2. May purchased a new mobile phone and paid ₱10,000. This means that her marginal utility from this...
A: In a market, marginal utility refers to the amount of satisfaction gained by a consumer when he cons...
Q: The Solow model with population growth predicts that_____ a. total income and total capital grow at...
A: The Solow model is an economic growth model that examines the change in the output level in an econo...
Q: What is meant by economies of scale and what is the importance of this concept to economic growth?
A: Economies of scale can be achieved by various measures, basically it refers to anything that helps i...
Q: what does Adam Smith mean by “self-regulating
A: Adam Smith in his book called "The Wealth of Nation" published in 1776 has described the "self-regul...
Q: Would you consider globalization as a boon or bane?
A: Some arguments are for and some arguments are against the globalisation . Following are the reason ....
Q: Please discuss the concept of the Balance of Payment account. Further, discuss the three components ...
A: BOP keeps track of all transactions that affect a currency's demand and supply. . Assess a country's...
Q: Provide an overview of online marketing tactics and partnerships, including business-to-business (B2...
A: The word "online marketing" refers to a collection of tools and strategies for using the internet to...
Q: Instructions: Adjust the sliders so that the vertical intercept of the supply curve is $20 and the v...
A: In economics, supply and demand refers to the relationship between the quantity of a commodity that ...
Q: The Closed-Economy One-Period Model: Changes in TFP Consider the CEOP model. Show the effect of an ...
A:
Q: US oil demand is given by P = 106 - 7* Q, where P and Q are oil price and oil quantity (in barrel) d...
A: Demand curve has a negative relationship with price.
Q: 2. What is the maximum amount you would pay for an asset that generates an income of P550,000 at the...
A: Opportunity cost means the sacrifice of a person while choosing an alternative.
Q: Which of the following parameters produces the largest fluctuations in real GDP from an autonomous e...
A: The multiplier value depends on the value of MPC, Tax and marginal propensity to import.
Q: The production of good x creates a negative externality on firms producing good y. Total costs are c...
A: Given: TC (x) = x2 px = 90 c(x,y)=y2 + 20x py = 20
Q: 26,000 HEOM in 3% co.yearly 40,000
A: Introduction We have given a cash flow. Average value of 26,000 = 26,000/6 = 4,333.33 Present value ...
Q: Suppose a profit-maximizing monopolist is producing 900 units of output and is charging a price of $...
A:
Q: In situations of exces demand, sellers might lower quality when they are unable to raise prices beca...
A: In a market, excess demand refers to the situation when there is more demand for goods and services ...
Q: Suppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, and public ...
A: We have, GDP = Y = 8billion Taxes = T = $1.5 billion Private saving = $0.5 billion Public saving ...
Q: difference between income and wealth, and why both are important in terms of economic security for o...
A: income refers to the amount of money received by a individual person , group or company during a c...
Q: An industrial firm uses economic analysis to determine which of two different machines to purchase. ...
A: Answer :- Here, Assume minimum attractive rate of return is 8%. Given the above information we anal...
Q: Fill in the blanks with the mumber that correspoods to the correct word or phrase from the word bank...
A: Economics is defined less by the issues that economists study and more by how economists study them....
Q: The LM curve is upward sloping since interest rate increase leads to output increase. TRUE or FALSE....
A: The liquid preference-Money supply curve shows the point at which the money supply and money demand ...
Q: According to Max Weber,a. early Protestantism provided a social environmentconducive to capitalism.b...
A: The answer is - b. capitalism developed because of Protestantism.
Q: Suppose we have a duopoly with a market demand curve P-100-1.5Q. Firm A has TCA=25+2qA while Firm B ...
A:
Q: If the risk-free rate is 3 percent and the risk premium is 5 percent, what is the required return?
A: The required return = return on risk free invested + risk premium So if the risk premium is 5 percen...
Q: Define Elasticity in your own words and also explain how elasticity can be measured?
A: Introduction and definition of the elasticity is as under:
Q: Suppose the economy of Canada is governed by the following consumption function, nvestment function,...
A:
Q: Assess the effects of Price floor (Hint: Government policies and intervention)
A: Price floor is the minimum legal price at which a good can be sold. Below which a good can't be sold...
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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…You make delicious cupcakes that you mail to customers across the country. Your cupcakes are so unique and special that you have a great deal of pricing power. Your customers have identical demand curves for your cupcakes, and a representative customer’s demand curve is shown below. (It’s not needed, but the demand curve equation is P=5-0.2Q or Q=25-5P.) Suppose your MC=$1/cupcake, whether you produce lots or just a few cupcakes. To keep things simple, suppose there are no fixed costs, so FC=0. a) Acting as a monopolist, show the standard pricing analysis on the graph below that identifies your profit-mamximing price and quantity for your representative customer. Shade areas representing your profit and CS. (PS and profit are the same here since FC=0). b) Suppose you offer a quantity discount: first 10 cupcakes at $3 each and any cupcakes over 10 are offered at a discounted price. What discount price will maximize your profit? Show this quantity discount arrangement on your graph…The representative consumer of a soft drink has a weekly demand given by the function P = 1 – 0.075Q and the cost of producing the soft drink is C = 0.4Q (where Q is the number of cans of soft drink). Show that, instead of selling the product case by case, it is in the firm's interest to make the soft drink available in 8-can packages at a price equal to the cost of production plus consumer surplus. (hint: calculate the profit per consumer in both versions)
- Problem 3 Consider a market with two firms. Each firm is located at one end of a line with lenght one. There is a mass one of consumers. The location of each consumer is given by 0 < x < 1 which is uniformly distributed (with density 1). Firms have no cost of production and set price simultaneously. a) Derive the demand for each firm by identifying the location of the indifferent con-sumer for each price pair. Assume that all consumers know about both products. b) Consider again that consumers can only buy after receiving an ad. Suppose there is an avdertising company that offers the firms to coordinate the targeting of their ads. The company suggests to inform all consumers with a location between 0 and 0.4 the product of the firm at location 0 and to all consumers between 0.6 and 1 the product of the firm at location 1. Determine the optimal prices for both firms if they accept this offer. What are the resulting profits? ( please solve question b only)Exercise A.9 In a market only two firms produce a homogeneous good. You work on one of them and are tasked with drawing up the production strategy for the coming year. The two companies in the market have the same information and the objective of both is the maximization of their profit. You know: the inverse market demand curve of the good: P(Q)=200-2Q where Q = q₁ + q₂ , the function that represents the costs of your company and the rival company: C(qᵢ) = 20qᵢ (for i=1, 2), and the data in the following table, with the optimal decisions according to the different types of competition:C(qᵢ) = 20qᵢ and the data in the following table, with the optimal decisions according to the different types of competition: q1 q2 P Bertrand 45 45 20 Cournot 30 30 80 Collusion 22,5 22,5 110 a) What is more in your company's interest to compete or cooperate with the rival company? Keep in mind that explicit collusion agreements are illegal, so each…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…Under pure competition, the supply curve for a certain product is given by: P= Q2 + 100 , the demand curve is given by: Q = 40 - (1/25)P. 1. Using integration, calculate the consumer surplus. 2. Using integration, calculate the producer surplus. 3. Integrate the following: 2x2 ( 14x3 + 167 )0.9 within the range 3 and 9.The market inverse demandfor salt is P(Q) = 1000−10Q. There are n firms producing salt, each with the sameconstant marginal cost c. Show that as n increases, the market gets closer to efficiency.
- Two firms are engaged in Bertrand competition. There are 10,000 people in the population, each of whom is willing to pay at most 10 for at most one unit of the good. Both firms have a constant marginal cost of 5. Each firm is allocated half the market. It costs a customer s to switch from one firm to the other. Customers know what prices are being charged. Law or custom restricts the firms to charging whole-dollar amounts (e.g., they can charge 6, but not 6.50). a. Suppose that s = 0. What are the Nash equilibria of this model? Why does discrete (whole-dollar) pricing result in more equilibria than continuous pricing? b. Suppose that s = 2. What is (are) the Nash equilibrium (equilibria) of this model? c. Suppose that s = 4. What is (are) the Nash equilibrium (equilibria) of this model? d. Comparing the expected profits in (b) to those in (c), what is the value of raising customers’ switching costs from 2 to 4?.An industry has the following cost function: C(X, Y ) = 1500+20X +20Y . Market demands for the 2 goods are given by PX =80−X, and PY =140−2Y Suppose the government wished to use two part tariffs in these markets, and suppose further that two part tariffs are feasible. Imagine that there are 10 consumer in each market. Solve for a set of two part tariffs (one for each martket) that pay the firm zero profits in total, yet achieves efficiency.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…