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Company M and N compete for market and decide independently how much to advertise. Each can expend either $10 million or $20 million on advertising. If the firms spend equal amounts, they split the $120 million market equally. (for instance, if both choose to spend $20, each firm's net profit is 60-20=$40 million.) If one firm spends $20 million and other $10 million, the former claims two-thirds of the market and the latter one third.Firm N's Advertising10 million 20 millionFirm M's Advertising 10 million ?,? ?,?20 million ?,? 40,40A)Fill in the profit entries in the payoff table.B)If the companies act independently, what advertising level should each choose? Describe. Is a prisoner's dilemma present?C)Could the firms profit by entering into an industry-wide agreement concerning the extend of advertising? Explain.
Why does the burden of sales tax fall completely on customer when the value elasticity of demand is perfectly inelastic; the seller when perfectly elastic.
Cost-Plus Pricing. Wendel Stove Company is developing a "professional" model stove aimed at the home market. The company estimates that variable costs will be $2,000 per unit and fixed costs will be $10,000,000 per year.
Assume the following was overheard at the water cooler: "I think our medical device company should take advantage of economies of scale by increasing our output, thereby spreading out our overhead costs."
Explain and discuss the differences between private goods, public goods, natural monopolies, and open-access goods.
The demand for personal computers can be characterized by following point elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Indicate whether each of following statements is true or false, and describe your an..
A typical university football event need alumni to join one of many booster club before the person can buy season tickets.
Discuss and explain the limitations of the United States "supply side" policy in the war on drugs. Can we win the war on drugs? Describe your position on legalization.
Explain what happens to a market when Supply and Demand are not in equilibrium. Provide two instances from your personal experience when you observed the "disequilibria" of supply and demand in the market,
I believe that fast food restaurants show short run production function because of the one fixed input, capital. But, I need to elaborate more and produce the production function equation Q=F (L,K,M...) Can you please help?
Compute the expected market price. Show calculations please. How many units should you produce to maximize expected profits? What is your expected profit or loss? Again, show work.
Optimal pricing strategy varies significantly across different market structures. The pricing guidelines in a monopoly market are relatively straightforward. Since the company is the only producer offering the product, it can mark-up the price as ..
What is your expected rate of return over the one-month holding period?
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