On Echo Beach there are two ice-cream sellers, A & B. Echo Beach is two miles long running from east to west. Seller A is located half a mile from the east end of the beach whereas seller B is located half a mile from the west end. As it is hot, people are willing to pay up to $5 for an ice cream. There are 1000 people uniformly distributed along the beach. The cost of walking to the ice-cream seller is $0.5 per mile. The marginal cost of an ice cream to A&B is $2. (a) Derive demand curves for firms A & B (b) Write down the profit equations for firms A & B. (c) Derive the reaction functions for firm A & B.

On Echo Beach there are two ice-cream sellers, A & B. Echo Beach is two miles long running from east to west. Seller A is located half a mile from the east end of the beach whereas seller B is located half a mile from the west end. As it is hot, people are willing to pay up to $5 for an ice cream. There are 1000 people uniformly distributed along the beach. The cost of walking to the ice-cream seller is $0.5 per mile. The marginal cost of an ice cream to A&B is $2. (a) Derive demand curves for firms A & B (b) Write down the profit equations for firms A & B. (c) Derive the reaction functions for firm A & B.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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