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Exercise
Godzilla and Macrosoft produce software and operating systems respectively, both at marginal cost 10. Each firm has monopoly power in the production of its products. The products are perfect complements, i.e., consumers only obtain positive utility if they buy both products. The demand curve for the composite good software and operating system is given by
where p ≡ pc + Pm is the price of the composite good, pg the price of software and Pm the price of the operating system.
a) What is the profit-maximizing P in the case that Godzilla and Macrosoft merge?
b) Consider the nonintegrated structure. Suppose that Godzilla chooses its price first, and that Macrosoft only picks its price after observing Godzilla's price. Is the equilibrium price of the composite good higher than in the case of a merger?
c) Suppose now that the two firms choose their prices simultaneously. Is the equilibrium price of the composite good higher than in the case of a merger?
improve life style decsisions by reducing smoking, alcohol consumption, and drug use, imporve overall educational attainment so people can better follow the advice from the medical community.
g.r. dry foods distributors specializes in the wholesale distribution of dry goods such as rice and dry beans. the
Suppose that you are on the board of directors of a firm which is the dominant firm in the industry. That is, it lets all of the other firms, which are much smaller, sell all they want at the existing market price. In other words the smaller firms..
Firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?
Proposals to raise the minimum wage rate are often opposed with the argument that such a move would not only cause an increase in the unemployment rate but would also hurt the very people it is intended to help. Is there any validity to that argum..
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Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand is -1.0. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000.
What would happen to equilibrium GDP if the rate of investment increased to $250 from current $200 billion per year? If net exports go up by $20 billion what would happen to Equilibrium GDP?
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