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1. Consider a monopolist who faces a market demand curve for her product given by QD = 200 − 5p. The firm can product its goods using one of two technologies. Technology A has a cost curve given by CA(Q) = 4Q. Technology B permits the firm to product its good at a zero marginal cost but requires incurring a fixed cost of FB . (a) Write out an equation for the profits of the firm for each potential technology. Write out the firm’s marginal revenue and marginal cost curves under each technology. (b) Using technology A, what will be the equilibrium in the market? (c) Given your answer in part 1b, is the market efficient? Explain your answer providing a brief discussion of the nature of the inefficiency (why does it arise and what it represents). (d) If the firm uses technology B, what will be equilibrium in the market? (e) Suppose the market is made up of 100 individuals each with the individual demands given by qD = 2 − 1 p. Suppose the firm uses a two-part tariff based on individuals’ demand curves. Calculate the two-part tariff under each technology. (f) Is the market operating efficiently at the equilibria you calculated in part 1e? Explain. Calculate the value of FB such that the firm will prefer using technology A when pricing based on the market demand and prefer technology B when it can use a two-part tariff based on individual demand curves.
Betty can make either “12 bottles of wine and 0 boxes of chocolates” or “0 bottles of wine and 96 boxes of chocolates” or a combination of wine and chocolates. Find Betty's opportunity cost of a bottle of wine in terms of box(es) of chocolates.
Analyze the challenges that companies face in entering global markets. Identify the potential impact to capital budgets in making the decision to move into a global market.
The following relationships describe the economy of a random, fictitous country: Sketch the IS curve and LM curve for 1998 on a diagram and show the point where the interest rate and output are determined. Show what happens in the diagram if the mone..
Big pharmaceutical companies are oligopolies and as such their strategic decisions are influenced by the rival's actions. Describe the pros and cons of the oligopolistic firms in the healthcare sectors
A basic theory of underlying macroeconomic behavior and therefore useful for making policy predictions. Briefly explain.
Bank is willing to let business have an intermediate-term loan of $50,000 for five years at an interest rate of 6.5 percent. Estimate monthly payment and elucidate where taking this loan is a smart business decision.
How might oligopolistic increase total revenue without changing prices.
a multinational engineering consulting firm that wants to provide resort accommodations to certain clients is
If you were a manager at PepsiCo, would you try to convince your colleagues while introducing the new soft drink is the most profitable strategy.
The position of the long-run Phillips curve depends on what?
When the price of gasoline goes up demand for the Toyota Prius. Is this a violation of the principles of demand since gasoline is a complement to the Prius? Explain.
The firms and workers in Bayernland form expectations rationally. The firms and workers in Realland form expectations adaptively. Their otherwise identical economies are initially in equilibrium at the natural level of output with 6 percent inflation..
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