Reference no: EM133151263
a) Explain the concepts of negative externality and positive externality.
b) Using an appropriate example, explain the difference between a private cost and a social cost and a private benefit and a social benefit.
c) In a supply-and-demand diagram, show producer and consumer surplus in the market equilibrium.
d) Explain how tax paid by sellers and buyers affect the total surplus.
e) Explain, in words, what is deadweight loss( or welfare loss)
AS CFO Tor Everything Com, you are shopping for 6,800 square feet of usable office space for 25 of your employees in Center City, USA A Leasing broker shows you space in Apex Atrium, a 10-story multitenanted office building. This building contains 408,000 square feet of gross building area A total of 61,200 square feet is interior space and Is nonrentable. The nonrentable space consists of areas contained in the basement, elevator core, and other mechanical and structural components. An additional 40,800 square feet of common area is the lobby area usable by all tenants. The 6,800 square feet of usable area that you are looking for is on the seventh floor, which contains 38.080 square feet of rentable area, and is leased by other tenants who occupy a combined total of 27,200square feet of usable space. The leasing broker indicated that base rents will be $30 per square foot of rentable area.
Required:
a. Calculate total rentable area in the building as though it would be rented to one tenant.
b. Calculate the load factor and common area on the seventh floor only
c. Calculate the rentable area, including the load factor for common areas on the seventh floor and the total rent per square foot that will be paid by Everything.com for the coming year if it chooses to lease the space.
d. Calculate the load factor and common area on the seventh floor, assuming that the owner adjusts the load factor for other common areas in the building
e. Calculate total rent per square foot, assuming that adjusted load factors are applied to usable area for both the common areas In the building lobby and on the seventh floor.
A cable TV monopolist has two types of programming to offer: sports and cooking. Consumers are also of two types and differ in their absolute and relative valuations of these two types of programs. Each type's maximum willingness to pay for each type of program is shown in the table below For simplicity, assume zero marginal cost and that there is one consumer of each type.
sports cooking
Type 1 $15 $10
???? 2 $8 $12
a Ignoring fixed costs (assuming they are zero), what profit could the firm obtain if it could perfectly price discriminate?
b. Suppose the firm is required by regulators to use uniform prices. If it charges a single price for each type of programming, what profit will the firm obtain?
e Suppose the firm instead bundles the two types of programming. What profit can it obtain. Explain?
Consider a Hoteling model of product differentiation in which there is a continuum of consumers uniformly distributed on the interval [0,1]. Firms will also be located on this interval. Consumers have unit demands. A consumer who buys at price from a firm located a distance Δaway obtains utility v-p-t Δ². Assume all goods can be produced at zero marginal cost and that v is sufficiently large that all consumers will buy one good.
a Suppose there are two firms and that prices are fixed at p= 1 for both firms. If firms choose their locations simultaneously, what locations do they choose in a pure strategy Nash equilibrium? Prove your answer
b. Now suppose that the two firms move sequentially in choosing locations. What locations do the firms choose in a subgame perfect equilibrium?
c. Now suppose the locations of the firms are fixed at the endpoints of the interval, but prices are now chosen simultaneously by the firms. Derive the demand curves for the two firms. Solve for the Nash equilibrium prices.
d. What is the interpretation of the parameter t? How do the prices in part c vary with this parameter? Provide some intuition.
Consider a version of the Hoteling model in which prices are endogenously determined. Two firms sell horizontally differentiated products located at opposite ends of the one-dimensional product space. Firm 0 is located at 0. Firm 1 is located at 1. M consumers are uniformly distributed between 0 and 1, with each consumers location giving his most preferred type of product. Each consumer places value on one unit of his most preferred product, but incurs a transportation cost" λD2 when purchasing s product which is located a distance D away Assume is sufficiently large that all consumers purchase one unit .Firm have no fixed costs but marginal costs of c per unit. Firms compete by choosing prices simultaneously,
a. Derive the demand curve for each firm as a function of the prices chosen. Explain the presence of firm j's price pj, in the demand function for firm i (i =j). Is i's demand increasing or decreasing in p,? Why?
b. Find the Nash equilibrium prices.
c. How do the Nash equilibrium prices vary with λ? Provide some intuition for your answer.
d. Now suppose firm 0 can move to any location a between zero and 1 before the price-setting stage. Derive the demand curve for firm 0 as a function of a and the prices of each firm. You may assume that the indifferent consumer is located between the two firms. Using this demand function, explain intuitively the effects (there are two of them) of changes in a on firm O's demand.