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Consider the horizontal quality model on the unit interval from 0 to 1. There are N consumers located uniformly along the interval. There are two firms, with zero marginal costs, initially located at 0 to 1. Consumers will buy one unit of the good from the lowest cost retailer as long as the effective price is below V. They have transportation costs of t getting from their location to the store and back. 1.If the firms sell to the whole market, derive the function governing demand to each firm as a function of the two prices. 2.Solve for the equilibrium price if both firms sell to the whole market. 3.What condition do we have to check to ensure that the firms sell to the whole market? 4.Solve for the equilibrium price if both firms only sell to a part of the market. 5.Suppose that firm 1 is located at a and firm 2 is located a b (without loss of generality, let 0 ≤ a < b ≤ 1). Show the profit function for each firm as a function of their prices and the location of both firms.
Assume that incomes of the consumers in this market increases. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change. 8. Assume that the number of sellers decreases in this marke..
Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An emission reduction filter will cost $75,000 and have an expected life of 5 years. Carlisle's MARR is 10% per year. what i..
Jane’s sister-in-law, a stockbroker at Invest, Inc., is trying to get Jane to buy the stock of HealthWest, a regional HMO. The stock has a current market price of $25, its last dividend (D0) was $2.00, and the company’s earnings and dividends are exp..
Which of the following trends favor a more labor-intensive method of production? A growing number of desperately unemployed people as the result of rural-urban migration. A limit to the level that wages can fall (subsistence)
Take some time to think about the ways in which your learning in this class relates to the real world. Has the knowledge you gained been valuable in helping you understand or evaluate events or policies? Are there any current events in the news that ..
At a restaurant that does not take reservations, people arriving at 7:30 normally have to wait for an hour, but some people arriving at that time give money to the hostess and are promptly seated.
A drought in California destroys many grapes. As a result of the drought, what happens to the consumer surplus in the market for grapes and to the consumer surplus in the market for red wine? Draw the necessary graphs to represent this scenario and t..
Define three types of elasticity of demand. Indicate how you would use information from recent research paid by your company that the own price elasticity of your product is -1.2 and not -0.8 as previously thought.
In at least three well composed paragraphs, please describe the effect that changes in business taxes, personal income, and transfer payments have on a country’s gross domestic product (GDP).
A monopolistic firm faces the following demand curve. Q = 8000 -10 P This monopoly's cost function has been estimated as follows: TC = 480,000 + 40 Q. What price should this monopoly charge to maximize its profit?. What would be its equilibrium profi..
Assume that a national restaurant firm called BBQ builds 15 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $300,000 of equipment and furnishings. What is the amount of economic investment that ha..
Suppose the employees of Starbucks in China are paid 8 yuan per hour and a cup of coffee is priced at 8 Yuan. If Starbucks is maximising its profit, What is the value of marginal product of labour (VMPL) per hour of the last worker employed by Starbu..
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