Based on the Brander and Spencer model, if the domestic firm’s profit function is π (x, y, m) = xp(x+y) – c(x) -mx and foreign firm’s profit function is π (x, y) = yp (x +y) -c(x)). M is the charge imposed by the government on exports. Describe the effect on x and y.
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Based on the Brander and Spencer model, if the domestic firm’s profit function is π (x, y, m) = xp(x+y) – c(x) -mx and foreign firm’s profit function is π (x, y) = yp (x +y) -c(x)). M is the charge imposed by the government on exports. Describe the effect on x and y.
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- Exercise 6.8. Two companies with cost functions C1 (q1 )=5q1 and C2 (q2)= 0.5 q2 ² supply the to the same market. If the inverse market demand function is given by P = 100 - 0,5Q , where Q = q₁ + q₂ , find a) The production level of each firm, the price and the profits if the companies compete according to the Cournot model. (b) The level of production of each undertaking, the price and the profits if the undertakings agree to jointly maximise their profits. Show the results with the help of graphs.Consider a market demand function P=100-0.01Q. There are only two firms in the market and each firm's total cost function is 40q to produce identical products. Suppose Firm 1 is the first mover (leader) and Firm 2 is the follower. What is the optimal level of quantity for Firm 2 in this Stackelberg model? 1000 1500 2000 25000 3000Since you know all about perfect competition, monopoly, and oligopoly, we can find out how various types of firms might feel about uncertainty concerning the prices of its factors of production and output. Consider a profit-maximizing firm that produces a single good from several factors. The firm is characterized by a production function y = f(x1, ... , Xn), where y is the level of output obtainable from factor inputs x1, ... , Xn. We will use p to denote the price of the output good, and Wi to denote the price of factor input i. When there is uncertainty a priori about these prices, the firm is allowed to choose its production plan after any uncertainty in prices resolves. (c) Finally, consider this question in the context of a von Stackelberg duopoly. Two firms produce an undifferentiated commodity for which demand is given by P = A - X, where P is price and X is total supply. Demand-is unchanging. Each firm has production technology with a fixed cost F for producing anything at…
- A large firm has two divisions: an upstream division that is a monopoly supplier of an input whose only market is the downstream division that produces the final output. To produce one unit of the final output, the downstream division requires one unit of the input. If the inverse demand for the final output is P = 1,000 − 80Q, would the company’s value be maximized by paying upstream and downstream divisional managers a percentage of their divisional profits?Suppose a firm can invent a new product. That firm is the only entity in the world that can invent the product. Doing so incurs a research cost of r to be paid once in the first period. The monopoly price for this new product is 6$ per unit and the firm’s production cost after doing the research in (q^2)/2 where q is the quantity of the good produced.Time is discrete and the firm faces the same price and cost function every period. Without a patent, other firms enter the market and those firms can produce the product more efficiently, therefore without a patent, the firm makes zero profit.1) What is the value for the firm of a patent with infinite duration? Assume a discount factor b = 0. 9.2) Suppose that there is no possibility for the firm of keeping a trade secret. The research cost for that good is 30$. The government can create a patent for the good before the firm has to make a research decision. The terms of the patent cannot be changed after its creation. What is the duration…Assume the market shares of the six largest firms in an industry are 15 percent each. The six-firm concentration ratio would indicate that the industry is highly concentrated, while the Herfindahl- Hirschman Index would not. True OR False? If the inputs to a production process are perfect substitutes and the marginal rate of technical substitution is equal to the ratio of the prices of the two inputs, the firm can choose from a virtually infinite array of combinations of the two inputs to minimize the costs of producing a given level of output. True OR False?
- True or False: Horizontal mergers between firms producing distant substitutes are more likely to harm economic welfare.I understand the other parts. Can you please answer part d and e below? Each of two firms, firms 1 and 2, has a cost function C(q) = 30q; the inverse demand function for the firms' output is p = 120-Q, where Q is the total output. Firms simultaneously choose their output and the market price is that at which demand exactly absorbs the total output (Cournot model).(a) Obtain the reaction function of a firm.(b) Map the function obtained in (a), and graphically represent the Cournot equilibrium in this market.(c) Repeat (b), this time analytically. (d) Now suppose that firm 1's cost function is C(q) = 45q instead, but firm 2's cost is unchanged. Analyze the new solution in the market. (e) Obtain the total surplus, consumer surplus, and industry profits in both cases, and compare. What is the effect of the worsening in firm 1's cost?Assume a monopoly has two groups of customers, and each group of customers has different demand for the firm's product. Group A's demand is: Pa = 90 - .1qa where qa is group A's quantity demanded and Pa is the commodity's price in dollars for group A customers. Group B's demand is: Pb = 170 - .2qb where qb is group B's quantity demanded and Pb is the commodity's price in dollars for group B customers. The firm's total cost curve is: TC = 30,000 + .05q2 where TC is the firm's total cost in dollars and q is the total quantity of output produced by the firm. Based upon the above equations, answer the following questions: a. What quantity of the commodity would the firm sell to customers in group B? What price would the firm establish for customers in group B? b. What quantity of the commodity would the firm sell to customers in group A? What price would the firm establish for customers in group A?
- Labour Demand with Monopsony in the Labour Market and Monopoly in the Output Market in the Short Run. You are the manager of a business that operates as a Monopolist in the output market, and it is a Monopsonist in the local labour market. The production function of the business is given by: Q=4L In the production function, Q is output, L is the number of workers employed, As a Monopolist, the firm faces a market demand given by: P = 100-Q As a Monopsonist the firm faces a supply of labour given by the expression: w = 8L a) Calculate the equilibrium number of units of labour employed in short run. b) Briefly discuss the advantages for a firm of being a Monopolist in the output Market and a Monopsonist in the Labour Market and try to find a real life example of a firm that can modeled as a Monopolist/ Monopsonist. c) What have you learn from doing or thinking about this problem?A market consists of a dominant firm and a number of fringe firms. The followings are the information about these firms. Total market demand: QALL=300 – (2.5) P The competitive fringe supply function (total): QF=2P-12 The dominant firms marginal cost function: MC = 12 + (1⁄2) QD. a) What is the equilibrium price set by the dominant firm? b) How much will the dominant firm supply to the market at the price found in question (a)? Show the answers graphicallyTwo firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by c; (q) = 16q;. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses pi = 32, Firm 2's best response is to set what price? b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses pi = 9, Firm 2's best response is a range of prices. What is the lowest price in this range? d) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 42 units, and Firm 2 can produce at most 44 units. If firms set different prices,…