Suppose that a manufacturer produces two brands of a product, brand 1 and brand 2. Suppose the demand for brand 1 is x = 88 - p, thousand units and the demand for brand 2 is y = 98 - p2 thousand units, where p, and p, are prices in dollars. If the joint cost function is C = xy, in thousands of dollars, how many of each brand should be produced to maximize profit? brand 1 thousand units brand 2 thousand units What is the maximum profit? thousand dollars
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- Question AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. a. What is the market structure of AVAC? State its characteristics. b. To maximize profit, What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? If this number of packs is produced and sold, what will be the firm’s monthly profit? c. Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph. d. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal…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 equilibriumSuppose a manufacturer and its retailer face the problem of double marginalization. If the manufacturer sets the wholesale price equal to its marginal cost c and in addition, requires the retailer to pay a fraction α (between 0 and 1) of its profit. 4.a Write down the retailer’s profit maximization problem. Will this practice solve the double marginalization problem? (That is, will this practice maximize their joint profit?) 4.b Suppose the retailer is required to pay a fraction of α of its sales (i.e., total revenue). Write down the retailer’s profit maximization problem. Will this practice solve the double marginalization problem?
- AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. What is the market structure of AVAC? State its characteristics. To maximize profit, What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? If this number of packs is produced and sold, what will be the firm’s monthly profit? Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on…AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. A.What is the market structure of AVAC? State its characteristics B.To maximize profit, What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? If this number of packs is produced and sold, what will be the firm’s monthly profit? C.Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph. D.Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal revenue?Would…AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. a. What is the market structure of AVAC? State its characteristics. b. To maximize profit, What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? If this number of packs is produced and sold, what will be the firm’s monthly profit? c. Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph. d. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal…
- ASAP PLZ You are the manager of Taurus Technologies, and your sole competitor is Spyder Technologies. The two firms’ products are viewed as identical by most consumers. The relevant cost functions are C(Qi) = 2Qi, and the inverse market demand curve for this unique product is given by P = 650 −3 Q. Currently, you and your rival simultaneously (but independently) make production decisions, and the price you fetch for the product depends on the total amount produced by each firm. However, by making an unrecoverable fixed investment of $1,800, Taurus Technologies can bring its product to market before Spyder finalizes production plans. (Assume Taurus Technologies is the leader in this scenario.)What are your profits if you do not make the investment? $ ____What are your profits if you do make the investment?Instructions: Do not include the investment of $1,800 as part of your profit calculation. $ ____ Should you invest the $1,800? multiple choice Yes - the benefits of establishing…DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for the services is ? = 2040 − 20?where quantity is measured in pave jobs per month and price, in dollars per job. The firms have an identical marginal cost of $200 per driveway. If the two firms collude, splitting the work and profits evenly, how many driveways will each firm pave, and at what price? How much profit will each firm make? Does Asphalt have an incentive to cheat by paving one more driveway each month? Show it numerically.
- Please no written by hand solutions 2. Mr Gieves and Mr Hawkes produce items of clothing. The market demand for clothes is y = 13-p with y = y1+y2 and p denoting the market price of clothes. Mr Gieves and Mr Hawkes compete by simultaneously choosing the quantity of clothes to send to the market, and their cost functions are C1 (y1) = y₁ and C₂(y2) = y2 respectively. (a) Set up the profit functions, and derive the reaction functions. (b) Find the Cournot equilibrium of the market. Indicate what the market price, individual outputs and profits are.1. Two firms compete in a market to sell a homogeneous product with inversedemand function P = 960-6Q. Each firm produces at a constant marginal cost of$60 and has no fixed costs.a. Assuming perfect competition, computei. Equilibrium price and quantityii. Profits and producer surplusiii. Consumer surplus and total surplusb. Assuming Cournot duopoly, computei. Reaction functions for each firmii. Profits of each firmiii. Consumer surplusiv. Total welfare loss relative to perfect competition (if any)c. Assuming the firms collude and act as a monopolist, computei. Equilibrium price and quantityii. Total profitsiii. Consumer surplusiv. Total welfare loss relative to perfect competition (if any)d. Rank the output quantities, profits, and total welfare by the three marketstructures aboveThe cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2where q is in millions/gallons per year. The demand for wastehol is currently perfectly inelastic at 5 million gallons per year. Assume that producers of wastehol are perfectly competitive. California is deciding whether to convert all wastehol producers into a regulated wastehol utility. If wastehol is a regulated monopoly utility with the cost function above, what price would regulators set as the price of wastehol? Now assume that the wasteahol market has boomed and demand has grown to 20 (again million gallons per year). Now what is the regulated price of wastehol? You are the wastehol producer and are trying to decide whther to lobby for deregulating the wastehol industry. If wastehol were deregulated, if demand remains 20, what would the perfectly competitive price be? If you are a wastehol customer, you would prefer a deregulated industry if demand were 20? True/False?
