In Nyeri town there are only two milk processors. The local inverse demand for milk is given by: Q = 120- P, where P denotes price, Q denotes the total quantity measured in cartons. Both milk processors have the same cost function given by C = 30Q, where C is total cost and Q is output measured in cartons. What output should Firm 1 and 2 produce? Select one: A. Each should produce 15 units of output B. Each should produce 50 units of output C. Each should produce 90 units of output D. Each should produce 45 units of output E. Each should produce 65 units of output F. Each should produce 60 units of output G. Each should produce 30 units of output H. Each should produce 32.5 units of output

In Nyeri town there are only two milk processors. The local inverse demand for milk is given by: Q = 120- P, where P denotes price, Q denotes the total quantity measured in cartons. Both milk processors have the same cost function given by C = 30Q, where C is total cost and Q is output measured in cartons. What output should Firm 1 and 2 produce? Select one: A. Each should produce 15 units of output B. Each should produce 50 units of output C. Each should produce 90 units of output D. Each should produce 45 units of output E. Each should produce 65 units of output F. Each should produce 60 units of output G. Each should produce 30 units of output H. Each should produce 32.5 units of output

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.
Suppose Firm X is a dominant firm in a market where the market demand is Q = 1200 -2p. Once Firm X sets its price, those small competitors set their prices a little lower so that they can always sell up to their capacity. Assume the small firms’ combined capacity is 100 units. Further assume Firm X’s marginal cost is 50. Answer the following questions. Let Q^D be the quantity produced by the dominant firm. Write down the residual demand function faced by Firm X. (Hint: Think about how Q and Q^D are related.) Find Firm X’s profit-maximizing price.
Consider a market where the inverse demand function is P = 400 – 20Q, where Q is the aggregate output. Assume there are three firms which compete à la Bertrand. a)What is the equilibrium price and the corresponding aggregate output if all firms have a constant marginal cost equal to 40? b)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 100? c)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 260?
Demand for microprocessors is given by P = 35 – 5Q , where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi, where qi is the output of firm i. a) Does the typical microchip firm display increasing, constant, or decreasing returns to scale? What would you expect about the real microchip industry? In general, what must be true about the underlying technology of production for competition to be viable?
Consider a homogeneous goods industry where two firms operate and the linear demand is given by p(y1 + y2 ) = a - b(y1 + y2 ), where p is the market price, and y1 (y2) is the output produced by firm 1 (2). There are no costs for firm 1 or firm 2. A. What is the industry output? B. Suppose the inverse demand curve in a market is D(p) =a-bp, where D(p) is the quantity demanded and p is the market price. Firm 1 is the leader and has a cost function c1(y1)=cy1 while firm 2 is the follower with a cost function c2(y2 )= y^22/2 (image of function attached). Firm 1 sets its price to maximise its profit. Firm 1 correctly forecasts that the follower takes the price leader’s chosen price as given (price taker) and chooses output so as to maximise its own profit. Write down the profit function of the follower. Calculate the profit maximising quantity that the follower selects given the leader’s chosen price p (i.e., calculate the follower’s supply curve S(p)). Interpret the solution to the…
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? Calculate the total market demand at the price found. b) How much will the competitive fringe supply to the market at the price found in question 2(a)? c) How much will the dominant firm supply to the market at the price found in question 2(a)? d) Show the above answers graphically.
Wakanda is a firm that solely supplies vibranium to Marley and Paradis. The demand function of the Marley market is given as QM=110-PM , and the demand function of the Paradis market is QP=30-PP . Wakanda’s total cost in producing vibranium is given as TC=100+10Q , where represents a ton of vibranium. 1. Calculate the equilibrium price and output for each market. 2. How much is the total revenue in each market?
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. What is the equilibrium price set by the dominant firm? Calculate the total market demand at the price found in question 2(a). How much will the competitive fringe supply to the market at the price found in question 2(a)? How much will the dominant firm supply to the market at the price found in question 2(a)? 5. Show the above answers graphically.
Consider two identical firms that face themarket demand p = 180 − q, where q = q_1 + q_2 is the total outputproduced by the two firms, and qi (i ∈ {1, 2}) is the output of firm i.The cost function of firm i is C_i(qi) = q_2i . Suppose, firm 1 chooses theprice p per unit of output first, and firm 2 will take the price p as givenand make its choice of output quantity q2.(a) Carefully write down Firm 2’s optimization problem and solve it.(b) Carefully write down Firm 1’s optimization problem and solve it.(c) What is the total output quantity produces by the two firms?Which profits will the firms make??
Mr. X and Ms. Y have entered into the following contractual arrangement with D. M. Kreps. Between now and the end of next week, each will install a certain amount of capacity for the manufacture of square based tri-prong slot poiuyts. Then Kreps will assume control of the capacity provided to him and produce and sell poiuyts. Demand for poiuyts is given by the demand function D = 10-P. (To keep matters simple, assume that production takes place for a single period.) The marginal cost of production of poiuyts is zero up to the total level of capacity that Mr. X and Ms. Y install. That is, if Mr. X installs capacity kx and Ms. Y installs capacity ky, then Kreps can produce up to k, + ky poiuyts and sell them, at zero additional cost. Kreps can, however, produce less if he so chooses. The contract signed by X, Y, and Kreps calls for Kreps to act in the best interests of X and Y. (He receives a smallf'ixed fee for doing so, which you may ignore.) So that there is no…
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) Calculate the total market demand at the price found in question (a). c) How much will the competitive fringe supply to the market at the price found in question (a)? d) How much will the dominant firm supply to the market at the price found in question (a)? Show the answers graphically.
Suppose there are in total 3 firms in the market. Firm 1 decides its output first, then Firm 2 and Firm 3 decide their outputs simultaneously. The inverse demand function is p = 20-3q, where q = q1+q2+q3, and each firm's cost function is ci(qi) = 5qi2. What is the quantity that Firm 1 produces? Round your answer to 2 decimal points.