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Suppose that market demand is given by P = 260 - 2Q and that foirms again have a constant marginal cost of 20, while incurring no fixed cost, but now assume that the firms are Bertrand competitors and have unlimited capacity.
a. What is the one-period Nash equilibrium market price? Assuming that firms share the market evenly any time they charge the same price, what is the output and profit of each firm in this equilibrium?
b. What is the output and profit of each firm if each agrees to charge the monopoly price?
Assume that the cartel is established at the monopoly price. Suppose one rm now deviates from the agreement assuming that its rival continues to charge monopoly price.
a. Given the deviating firm's assumption, what price will maximize its profits?b. If the deviating firm's assumption is correct, how much will the profit of the cheating rm be? How much will be the profit of its non-cheating rival?
Return again to the cartel in Problems 4 and 5. Now suppose that the market game repeated indefinitely. What is the discount factor (sigma) is necessary now in order to maintain the collusive agreement in an indenitely repeated setting?
Calculate the slope of the AE curve and the size of the multiplier if MPS = 0.20. Then, calculate the revised slope of the AE curve and the multiplier when you know that the imports and the marginal tax rate will reduce the slope of the AE curve b..
A recently developed citrus orchard will come into full bearing after 6 years. Starting at the end of the 7th year of operation and continuing through a productive life which lasts till the end of the 26th year, the orchard is expected to produce ..
John runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth)
Using the rule that the area of a triangle equals one half times the base times the height, calculate the consumer surplus and the producer surplus and the total (social) surplus. Does this outcome attain allocative efficiency.
If quantity of money is $3 trillion, real GDP is $10 trillion, the price level is ..09, the real interest rate 2 percent a year, and the nominal interest rate is 7 percent a year, calculate the velocity of circulation, the value M times V, and nom..
Does a monopolistic competitor produce more or less output as compared to an efficient level of production Explain. What are the benefits and drawbacks of this Should the government intervene to alter this
There are 75 firms in the perfectly competitive market for pencil erasers where the price is $50 per unit. Each firm faced costs of C(q) = 0.5q^3 - 5q^2 +65q How much does each firm produce and how much profit does each earn
Suppose a country has a money demand function ( M/ P)^d = kY, where k is a constant parameter. The money supply grows by 12 per year, and real income grows by 4 percent per year.What is the average inflation rate
Suppose that the eye doctor offers senior residents a discounted price for an eye exam. The demand function for senior residents is Qs = 50 - Ps, and the demand function for the general public is Qg = 60 - Pg. The marginal cost for an eye exam is ..
Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: Price Quantity Demanded Quantity Demanded for business travelers for Vacationers 150 2,900 1,000 200 2,700 750 250 2,550 550 300 2,..
A. Calculate the 1998-2008 growth rate in sales using the constant rate of change model with annual compounding.B. Forecast sales for the years 2011 and 2013. The following table shows annual sales data for Stuff Happens.
You have just purchased a new Ford Taurus for $20,000, but the most you could get for it if you sold it privately is $15,000. Now you learn that Toyota is offering its Camry, which normally sells for $25,000, at a special sale price of $20,000.
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