Reference no: EM131112646
Suppose now that a second firm enters the market. Let Q1 be the output of the first firm, yours, and Q2 the output level of the second firm. Market demand is now given by Q1 + Q2 = 53 – P or inverse demand can be expressed as P = 53 – Q1 – Q2. Also assume the second firm has adopted the same technology as you and thus has the same costs (both in total and per unit) as you. As in the Cournot model, with simultaneous choices of Qi, each firm chooses its profit maximizing level of output on the assumption that its competitor’s output is fixed at its’ profit maximizing level.
c. Calculate the Cournot equilibrium, the levels of each firm’s output at which each firm is doing as well as it can.
d. What are the resulting market price and profits for each firm?
e. What tactics might your firm, the original monopolist, employ to deter the other firm from entering? How much (maximum) might you be willing to pay, this period, to employ these tactics?
Now suppose there are N identical firms in the market, all with the same marginal and average costs. Using the Cournot mechanism, wherein each firm chooses its output simultaneously:
g. What will be the single market price each firm will charge [P = f(N)] ?
h. Demonstrate that as N becomes large(r), the market price and profit per firm approach those that would prevail under perfect competition.
|
Important characteristic of production functions
: Substitutability of inputs is an important characteristic of production functions. Also, capital deepening is a fundamental source of economic growth. Use the concept of input-substitutability to explain why the cost of manufactured goods tends to de..
|
|
Use restrictions may be intended to correct inefficiencies
: Land-use restrictions may be intended to correct inefficiencies in urban land markets. However, they also impact the distribution of educational resources, and thereby contribute to educational (and economic) inequality in the U.S. Name one land use ..
|
|
Replace all federal income taxes with a federal sales tax
: Imagine that a presidential candidate wants to replace all federal income taxes with a federal sales tax. Assume that the proposed sales tax rate can, and will, be set at a level that guarantees the new sales tax will generate exactly the same amount..
|
|
Use regression analysis-what does the rsquare value indicate
: Use regression analysis (JMP: Analyze>Fit Y by X …. and from the scatter plot click on the red triangle and select Fit Line) to test the hypothesis that there is a positive (direct) relationship between “stem length” and “wet weight”. What does the R..
|
|
Calculate cournot equilibrium-levels of each firm output
: Suppose now that a second firm enters the market. Let Q1 be the output of the first firm, yours, and Q2 the output level of the second firm. Market demand is now given by Q1 + Q2 = 53 – P or inverse demand can be expressed as P = 53 – Q1 – Q2. Calcul..
|
|
Discuss at least two economic phenomena
: Identify and discuss at least two economic phenomena for which the linear-in-parameters/linear-in-variables regression model may not be appropriate (besides any mentioned in the text).
|
|
Competitive consumers who have the same endowment
: Consider two competitive consumers who have the same endowment, with positive current income plotted on the horizontal axis and positive future income on the vertical axis. Each consumer’s current income is taxed at the rate t1 and future income is t..
|
|
Consider two competitive consumers who have same endowment
: Consider two competitive consumers who have the same endowment, with positive current income plotted on the horizontal axis and positive future income on the vertical axis. Each consumer’s current income is taxed at the rate t1 and future income is t..
|
|
Find deadweight loss as a percentage of total tax revenue
: Find the deadweight loss from the taxes in parts c and d, assuming that there are no externalities associated with trading in this market. Find the total tax revenues (equal to the tax per unit times the number of units sold when the tax is imposed)...
|