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Consider two countries that are freely trading in differentiated products. Each producer in the industry is subject to increasing returns to scale, derived from fixed costs of production. In particular, the cost function of a firm in the industry is linear with respect to output, with fixed costs of 100 and variable costs of 20 per unit of output. The demand function for each differentiated product is equal to Q= s[1/n - 1/2 (p-P)] where is size of the market, is the price charged by the producer and is the average price in the industry. There is free entry in the industry. Assume that the size of the market is 2,000 in the Home country and 3,000 in the Foreign country. [HINT (in case you need it): If the demand function is: , then ] a) Compute the equilibrium price that any producer will charge, as a function of the number of firms in the industry and the size of the market. b) Write down the average costs faced by any firm, as a function of the number of firms in the industry and the size of the market. c) Compute the number of firms (in the long run), the price charged for each product, and the quantity produced by each firm in the industry in the free trade equilibrium. Show it in a graph. d) Assume now that entry in the market is not free: each firm has to pay a license fee 300 to its own government, to be renewed every year, in order to participate in the market. Compute the number of firms (in the long run) in the free trade equilibrium under this new situation. e) Are consumers better off or worse off under the government licensing regime? EXPLAIN.
The revenue function R(x) and the cost function C(x) for a particular product are given. these functions are valid only for the specified range of values. Find the number of units that must be produced to break even. R(x) = 200x - x^2; C(x) = 10x + 7..
If the US federal income tax deductions for mortgage interest and state and local property taxes are eliminated (with no other change in federal tax laws), many taxpayers will have to pay more tax. Describe how the tax increases would be distributed ..
Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP per person grows at a 1.5 percent annual rate in Alpha and at a 2.5 percent annual rate in Omega. After 100 years, real GDP per person in Alpha is _____..
if demand is perfectly elastic the demand curve is horizontal. if demand for x shifts right as the price of good y increases, then x and y are substitutes. supply shifts rightward if input prices rise. it is possible for an economy to be inside its p..
Which of the following represents the consensus among most economists today with respect to the management of unemployment?
A company in the process industry produces a chemical compound that is sold to manufacturers for use in the production of certain plastic products. The plant that produces the compound employs approximately 300 people. Develop a list of six different..
But what about the unwritten or informal rules of doing business there—rules based on culture, religious codes, and societal constraints? Sometimes these laws can be very different from those in one’s home country or in other countries in which one i..
A firm manufactures a product that it sells for $100. It sells 1000 units per week. What is its total revenue? It costs the firm $80 to produce a unit. At its current short-run level of production, a firm’s average variable costs equal $20, and its a..
You sign a security agreement that describes the collateral. The bank does not file a financing statement. Has the banks security interest attached? If so, when?
You've recently learned that the company where you work is being sold for $475,000. The company's income statement indicates current profits o. $18,000, which have yet to be paid out as dividends. Assuming the company will remain a " going concern" i..
When a monopoly firm is operating in a range of output where total revenue is increasing as output increases, then marginal revenue
If typographical errors occur andomly, about how many pagesin book have three typographical errors. What is the median number of typographical errors per page.
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