nsider a Cournot competition with N identical ns, each having MC=Ò and FC=0. Inverse mand is P=1O-Q. Which of the following is true veral answers are allowed, wrong answers are nalized!). lect one or more: As N increases total market quantity increases As N increases profit per firm decreases As N inreases the sum of all firms profits remair changed As N increases market price decreases onsider a Cournot competition with N identical firms, each having MC=0 and FC=0. verse demand is P=10-Q. Which of the following is true? (several answers are allowed,
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- Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?COURSE: MICROECONOMICS - Cournot Model:In the market for a given good there are only 2 firms satisfying the demand, and their respective total cost functions respond to the form: CTi = 10Qi + 5 and the demand is estimated to be: P = 31 - QIf the decision variable for both firms is that the quantity they will produce and realize will be decided simultaneously it is asked to:(a) calculate the profit and reaction function of each firmb) graph market equilibriumc) calculate the profits that both companies will obtain in equilibriumNeed answer for part b only Zeus and Iron are the only two cement producers in Gotham. The cement they produce is essentially identical. In this market, each firm chooses the output level to produce and the price is determined by aggregate output (Cournot competition). The inverse demand for cement is given by P = 225 − Q/2 . Q is measured in tons and P is in euros. The marginal cost for Zeus is constant at 50 euros/ton. The respective cost for Iron is constant at 40 euros/ton. A technological innovation in the production process allows both firms to reduce marginal cost by 5 euros/ton. a) How much would each firm be willing to pay for the innovation, if it were the only firm to acquire it? b) Consider a situation where firms’ managers, simultaneously and non-cooperatively decide whether to acquire the innovation or not, which costs 900 euros, and then compete in quantities. What is the equilibrium of this game, based on its payoff matrix?
- onsider a homogenous good industry with four firms. Total demand is given by D(p)=200-p.The variable (=marginal) cost of each of the firms is c1=10, c2=20, c3=30 and c4=35. Firms compete in prices. Suppose firms 1 and 2 merge into one entity and produce with a marginal cost of 15. Which of the following statements is correct? After the merger, total welfare increases by $500. After the merger, total welfare decreases by $500. After the merger, total welfare increases by $1000. After the merger, total welfare decreases by $1000. None of the above.COURSE: MICROECONOMICS - PERFECT COMPETITION AND MONOPOLY (RESUBMITION QUESTION) We appreciate a perfect competition market where there is a predetermined limit number of firms with 20 total firms.Each has the cost function such that: CTi = qi2 + 4qi + 3 where qi indicates numbers of firms (i = 20) The demand in the market is: Q = 100 - 4pa) What is the individual supply of each firm?b) What is the supply of the whole industry?c) Obtain the market equilibriumIn the case where a new firm intended to enter a monopolist's market:(a) What kind of legitimate entry barriers can the firm face understanding the nature of the market it wishes to enter?b) What type of anticompetitive barriers could the firm already in the market present?a) A Dutch Brewing company produces Heineken beer, assume further that the marginal cost of producing a six pack of Heineken Beer is $6. Dutch Brewing company sells Heineken in two different Markets namely Africa and Europe whose inverse demand functions are ?? = 24 − ??and ?? = 12 − 0.5?? respectively.Requireda) Calculate the profit maximising Price-Quantity combinations in these two markets Africa and Europe.b) With this Pricing strategy calculate the profit. c) If competitive output (P=MC=6) for Africa is 18 and Europe is 12, Compute the deadweight losses in the two markets. d) Clearly illustrates that the third degree price discrimination is welfare improving over a single price policy. e) Suppose these markets were no longer separated. How would you construct the market demand in this situation? Would the monopolist’s profit-maximizing single price still be 15?
- Token price increases from $1.25 to $2.50: Ridership now declines to 25 % equivalent to 10 M less riders.......Assume costs (accounting) increase to $ 55 M and economic costs increase to $ 65 M; Supply increases by + 10%; * What is your revised "PED" & "PES"?; * What are your new profit & loss values based on evaluation of both accounting & economic costs ? Are you better or worse off ? * What could happen if your analysis was extended from one (1) month to six (6) months ? * What could happen if your market's (audience) average income increases or decreases by + / - 15 % given the change in the token cost from $1.25 to $2.50 ? * Would your "PED" and "PES" and profit / loss values change as well ?Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct.In a market with a single price-making firm with total costc(y) = 2y, the industry demand is givenbyQ= 100−2p. a) Find the inverse industry demand by solving forp, then graph the inverse industry demandwith price on they-axis. b) How do you expect the price of the good to be relative to its marginal cost?c) How do you expect the Lerner Index to be in relation to 0 and 1? Will it be 0? Will it be 1? d) Find the optimal supply and the equilibrium price in this market. Does the price match yourexpectations? e) Calculate the Lerner Index and mark-up in this market. Does this match your expectationsfor the Lerner Index?
- COURSE: MICROECONOMICS - Stackelberg ModelIn a given market good there are only 2 firms that satisfy the demand, and their respective total cost functions are: CTi = 400 and the demand that is estimated is P = 120 - 2QIf the exception variable of both firms is the quantity they will produce, such that the decisions to produce are made sequentially firm number 1 will be the leader who decides the quantity to produce and firm number 2 (follower) decides based on the production of firm number 1, we ask:(a) quantity produced by each firm and its equilibrium price in the market.(b) Profit of each company at equilibrium and (c) Graph your resultsAssume the laptop market has 5 participants, each accounting for 20% of market share. Now two of the competitors decide to merge, how would this change the HH index? Would the proposed deal likely raise FTC’s concerns on reduced competition? a. Increase by 400. No. b. Increase by 400. Yes. c. Increase by 800. No. d. Increase by 800. Yes.Competition and the Invisible Hand: End of Chapter Problem Let’s take a look at Invisible Hand Property 2 in action using a mathematical example. Suppose an industry is characterized by the following equations. We’re going to assume that all individual firms are identical to make this problem a little simpler. Demand: ??=100−2?QD=100−2P Individual firm's supply: ??=0.5+0.1?qS=0.5+0.1P Market supply with n firms: ??=?×??=0.5?+0.1??QS=n×qS=0.5n+0.1nP Individual firm's average cost: ??=5??−5+24.2??AC=5qS−5+24.2qS a. Suppose 24 firms are in this industry. What is the equation for market supply? QS =