Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 9, Problem 11CQ
To determine
The effects of drought in a perfect competitive market.
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Under the kinked demand curve model, an increase in marginal cost will lead to:
A. An increase in output level and an increase in price.
B. Neither a change in output level nor a change in price.
C. A decrease in output level and no change in price.
D. A decrease in output level and an increase in price.
E. An increase in output level and a decrease in price.
The demand and supply of pizza is defined by the following equations:
Qd = D(P, Y ) = 1 + Y − 2P
Qs = D(P, PM) = 2 P/PM
where, Qd is quantity demand, P is the price of each pizza sold, Y is the average income of consumers, Qs is the quantity supplied, and Pm is the price of inputs used in the production of pizza.
(a) List the endogenous and exogenous variables of this model
(b) Find the equilibrium price Pe and quantity Qe of pizza as a function of the exogenous variables.
(c) Use a simple demand and supply diagram to show what happens to the equilibrium price and quantity when there is an increase in one of the exogenous variables.
Consider the following Stackelberg model. There are two firms in the market. Firm 1 is the leader and firm 2 is the follower. Firms can decide to produce low or high. The extensive-form representation below presents the profits depending on production decisions of firms. The first value is profit of firm 1 and second value is profit of firm 2 depending on their production decisions. Solve using backward-induction. What are the optimal production levels of both firms? Describe how you found the optimal strategy using words.see the image
Chapter 9 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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