The government has announced its plans to license two firms to serve a market whose demand curve is given by P= 110 - 1Q. The technology is such that each can produce any given level of output at zero cost, but once each firm's output is chosen, it cannot be altered. Instructions: Round your answers to the nearest penny (2 decimal places). a. What is the most you would be willing to pay for one of these licenses if you knew you would be able to choose your level of output first (assuming your choice was observable by the rival firm)? b. How much would your rival be willing to pay for the right to choose second?
The government has announced its plans to license two firms to serve a market whose demand curve is given by P= 110 - 1Q. The technology is such that each can produce any given level of output at zero cost, but once each firm's output is chosen, it cannot be altered. Instructions: Round your answers to the nearest penny (2 decimal places). a. What is the most you would be willing to pay for one of these licenses if you knew you would be able to choose your level of output first (assuming your choice was observable by the rival firm)? b. How much would your rival be willing to pay for the right to choose second?
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
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Transcribed Image Text:The government has announced its plans to license two firms to serve a market whose demand curve is given by P = 110 - 1Q. The
technology is such that each can produce any given level of output at zero cost, but once each firm's output is chosen, it cannot be
altered.
Instructions: Round your answers to the nearest penny (2 decimal places).
a. What is the most you would be willing to pay for one of these licenses if you knew you would be able to choose your level of output.
first (assuming your choice was observable by the rival firm)?
b. How much would your rival be wiling to pay for the right to choose second?
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