Exercise 2.9 Firms in a competitive industry have production costs C(q)=q²+20q+100 and the industry demand is QD(P)=1200-10P; a) Find the price, the production of the representative company, the production of the industry and the number of companies that will be part of the industry it in the long-term equilibrium. b) Suppose that demand shifts to Q°(P) = 1.800 - 12P. Find the price, quantity and profits of companies in the short term. Calculate the social welfare corresponding to this equilibrium. (c) Calculate the final long-term equilibrium. Describe the adjustment process in a graph.
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- Exercise 1: Stackelberg model Suppose there are two firms, Firm 1 and Firm 2. Both firms have the same production cost and they face the industry demand given below. Demand: P = 500 - Q Costs: MC = ATC = 200 Suppose Firm 1 is the incumbent and the first-mover. Its profit is equal to ________________. a.$14,000 b.$12,000 c.$11,250 d.$22,500 Continue with Exercise 1... If Firm 2 enters, its profit is equal to _________. a.$5,625 b.$6,000 c.$7,000 d.$11,250 Hi there, our teacher gave exercises before the final exam in 5 days. I have a hard time solving the Stackelberg model. Please help me out:)Exercise 4.5 Roger is a regular consumer of personalized greeting cards with Hofmann photographs. Its demand curve is given by qd = 31 - 0.5P. Rogelio is a representative consumer of this type of cards so we can assume that the rest of the customers, 1,000 in total, have the same demand curve. The supplier company, Hofmann, can produce each card at a constant average and marginal cost of €2. In the market of personalized greeting cards there are many other companies that offer very similar cards. Consider the following 4 scenarios: (i) Hofmann acts as a perfect competitor. ii) Hofmann acts as a monopolist. iii) Hofmann acts as a first-degree discriminator monopolist iv) Hofmann acts as a second-degree discriminator monopolist and offers each of its customers the possibility to buy the first 15 cards at a unit price of € 32, the next 5 (from € 16 to 20) at a unit price of € 22 and the following 10 (from € 21 to 30) at a unit price of €2. Calculate, for the 4 scenarios proposed, the…Question Google is considering an advertising campaign that is expected to increase the sales of its Pixel phone by 20%. Suppose that currently Google sells 1,000,000 units at $500 per unit and the variable cost per unit is $300. If the cost of the advertising campaign is $50 million, will Google find it acceptable? Question An attractive feature of new cell phones that was introduce d in recent years is that you can switch carriers easily with the same device. How does this feature affect demand for wireless phone services? What are the likely effects on the demand that a particular US carrier is facing? Are there any elasticities that were likely to be affected?
- You manage a company that competes in an industry that is comprised of fiveequal-sized firms that produce similar products. A recent industry report indicates that the market is fairly saturated, in that a 10 percent industrywide priceincrease would lead to a 22 percent decline in units sold by all firms in theindustry. Currently, Congress is considering legislation that would impose atariff on a key input used by the industry. Your best estimate is that, if the legislation passes, your marginal cost will increase by one dollar. Based on thisinformation, what price increase would you recommend if the tariff legislationis passed by Congress? Explain.Suppose demand and supply curves for you company’s product are given by:QD = 10 -XP QS =5 +YP You will need to find value for X between [0.1 -3] and Y between [0.1 -3] based on the elasticity of demand and supply. This elasticity in turn depends on the type of product, marketstructure and competitive advantage of the company. In this case, the product is an electric car and the price elasticity of demand is relatively high. Moreover, this does not have to be an exact value, and it should be done by looking at the graph of the price elasticity.Suppose demand and supply curves for you company’s product are given by:QD = 10 -XP QS =5 +YP You will need to find value for X between [0.1 -3] and Y between [0.1 -3] based on the elasticity of demand and supply. This elasticity in turn depends on the type of product, marketstructure and competitive advantage of the company. In this case, the product is an electric car and the price elasticity of demand is high.
- You are considering entry into a market in which there is currently only one producer (incumbent). If you enter, the incumbent can take one of two strategies, price low or price high. If he prices high, then you expect a $60K profit per year. If he prices low, then you expect $20K loss per year. You should enter if you believe demand is inelastic. you believe the probability that the incumbent will price low is greater than 0.75. you believe the probability that the incumbent will price low is less than 0.75. you believe the market size is growing.In some industries, securing the adoption of an industry standard that is favourable to one’s own product is an enormous advantage. It can involve marketing efforts that grow more productive the larger the product’s market share. Microsoft’s Windows is an excellent example.2 The more customers adopt Windows, the more applications are introduced by independent software developers, and the more applications that are introduced the greater the chance for further adoptions. With other products the market can quickly exhibit diminishing returns to promotional expenditure, as it becomes saturated. However, with the adoption of new industry standards, or a new technology, increasing returns can persist.3 Microsoft is therefore willing to spend huge amounts on promotion and marketing to gain this advantage and dominate the industry. Many would claim that this is a restrictive practice, and that this has justified the recent anti-trust suit against the company. The competitive aspects of this…If a firm is the leader (assume the firm has 100% market share) in supplying a product to the market at $3 per unit where the consumer is willing to pay $4.35 per unit, what is the profit (surplus) to the firm (assuming no additional cost to the firm) if the consumer purchases 23 units.
- A firm has the following total costs, where Q is output and TC is total cost: QTC0$ 1001110213031604200525063107380846095501065011760 Say the firm is in a perfectly competitive market. If the current market (equilibrium) price is $ 70, at what output level will the firm as a profit maximizer produce at? Say the market price rises to $ 100. At what output level (as a perfect competitor) will this produce at? How much profit is the firm making at a price of $90? Based on this calculation, do you expect firms to enter or leave this market? Say instead this firm is a monopoly. If the firm maximizes profit at an output level where marginal revenue equals $ 80, what output level will this be?– A certain cleaning company cleans professional offices and believes its staff can clean up to 300 office units a week at a labor and supply cost of $58 per unit. Preliminary pricing surveys indicate that if that if the company charges $100 per unit, it will have clients for 300 units. For every $5 price increase it can expect a demand of 10 fewer units. Assume the demand, s, is a linear function of price p. Find an equation for demand as a function of price. Find the Revenue and Cost functions, both of which are dependent on price p. Write the Profit function. Using Desmos, graph the Revenue, Cost, and Profit functions on the same coordinate plane. Label the axes and the functions and use an appropriate scale. Find the break-even points graphically and confirm algebraically. Label the regions of profit and loss on the graph. Algebraically find the price that results in a maximum profit. Conclusion: A price of $_________ results in a quantity of _____________ units…Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is -1.5. The marginal cost of producing the product is constant at $125, while average total cost at current production levels is $190.Determine your optimal per unit price if:Instruction: Enter your responses rounded to two decimal places.a. You are a monopolist.$ b. You compete against one other firm in a Cournot oligopoly.$ c. You compete against 19 other firms in a Cournot oligopoly.$