*YOU ONLY NEED TO ANSWER QUESTION F* 1. Consider a market for water with two firms. We assume two firms can producee. In the equilibrium found in part d, find the non-cooperative market outcome:the good without any cost (TC = 0). The market demand schedule is given as:market quantity, price, and each firm's profit.Quantity (gallon)Price ($)3090408050706060Number of sellers & Market outcome:7050As a new firm enters the market, now there are three firms in the market.Colluding is not allowed by the government, so they are in competition.8040f. How much would each firm produce? [Hint: Begin with the cartel situation.0630Check if a firm can increase its profit by cheating.]1002011010Cartel:Assume that two firms are colluding, so both firms agree upon a contract thatthey produce the same amount of output.g. Find the non-cooperative market outcome: market quantity, price, and eachfirm's profit.a. How much would each firm produce if they form the cartel? Why?b. Find the cartel market outcome: market quantity, price, and each firm's profit.Competition:After they form the cartel, each firm can choose to cheat at the agreement or tofollow the cartel contract. Assume firms are always self-interested, and make onlyone-time decision in this game.c. Now, is there any incentive for a firm to cheat the other firm? Why? [Hint:Begin with the cartel situation. Check if a firm can increase its profit bycheating.]d. In the end, how much would each firm produce in the competition? In otherwords, find the Nash equilibrium. [Hint: Check if any firm has an incentive toincrease or decrease its supply for each output level.]

Not much changes in the mechanics of the competition when a new player comes in. When three firms…

Business

Economics

N

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 2QR

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a) Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is (q,x) = q2 + (x-4)2 . Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is (r,x) = r2 + xr. Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain. b) Compute the social optimum, that is, the equilibrium prices, quantities, and profit when firm A and B are merged. Interpret the conditions and compare it to the solution in (a). Explain. c) Devise a quantity tax on product q for firm A in (a) such that the government can restore the social optimum in (b). d) Discuss other methods the government can use to restore the social optimum. Discuss advantages and disadvantages of the methods you propose. Explain.
Question: Explain the concept of consumer surplus and producer surplus. How are these measures related to market efficiency?Don't use chatgpt please provide valuable answer otherwise be ready for disupvote
Adani Shantigram is a picturesque township on Ahmedabad-Gandhinagarhighway. The statement ‘The Good quality life’ shows the commitment ofthe developer towards ensuring that the residents enjoy all the amenitiesand services in the township at least cost and inconvenience. In order toensure competitive outcome, ATRICO (Adani Real Estate Arm) hasensured that for all the important services, many service providers arepresent, so that none of them can charge a high monopoly price from theresidents. Therefore, there are 4 milk parlours, 4 laundromats, 4photocopiers, 4 beauty saloons and 4 grocers in the township. Thisnumber ‘4’ has been decided in a high level meeting, where this wasdiscussed that having less than 4 will result in duopoly/tight oligopoly,and having more than 4 will require more space and therefore notpreferred.Last month, the ladies in ‘Water Lily’ complained that the prices chargedby beauty saloons in the township are very high. In order to address thecomplaints, details…
Consider a town in which only two residents, Larry and Megan, own wells that produce water safe for drinking. Larry and Megan can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 6.00 0 0 5.50 45 $247.50 5.00 90 $450.00 4.50 135 $607.50 4.00 180 $720.00 3.50 225 $787.50 3.00 270 $810.00 2.50 315 $787.50 2.00 360 $720.00 1.50 405 $607.50 1.00 450 $450.00 0.50 495 $247.50 0 540 0 Suppose Larry and Megan form a cartel and behave as a monopolist. The profit-maximizing price is per gallon, and the total output is gallons. As part of their cartel agreement, Larry and Megan agree to split production equally. Suppose that Larry and Megan have been successfully operating as a cartel. They each charge the monopoly price and sell half of the…