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The inverse market demand for fax paper is given by P = 400 − 2Q, where Q = q1 + q2. There are two firms who produce fax paper. q1 is output of firm 1 and q2 is output of firm 2. Each firm has a unit cost of production equal to 40, and they compete in the market in quantities. That is, they can choose any quantity to produce, and they make their quantity choices simultaneously. a. Show how to derive the Cournot-Nash equilibrium to this game. What are firms’ profits in equilibrium? b. What is the monopoly output, i.e., the one that maximizes total industry profit? Why isn’t producing one-half the monopoly output a Nash equilibrium outcome?
Return to the last question, but suppose now that firm 1 has a cost advantage. Its unit cost is constant and equal to 25 whereas firm 2 still has a unit cost of 40. What is the Cournot outcome now? What are the profits for each firm?
Pick Industries produces plastic toothpicks that it sells to distributors in the Southwest. During the early 1990s, the price of the plastic it uses to produce toothpicks fell by 46 percent, due to a local glut of recycled plastic containers. what im..
Spivey just won the Powerball lottery! The $25,000,000 jackpot will be paid in 10 annual instalments of $2,500,000 each, with the first payment to be paid immediately. Spivey's opportunity cost of capital (interest rate) is 4% per year. What is the p..
Firm 1 and Firm 2 compete in an industry and must decide whether to introduce an upgrade to their existing products. The nature of the strategic interaction is described by the game box, where (Y) means “upgrade” and (N) means “do not upgrade”. Draw ..
In class, we study the two-part tariff question with the following system. Consumer 1 has demand function q1 = 50 − p1 and consumer 2 has q2 = 50 − 2p2 The per-unit cost of the production is mc = 10. What’s the necessary conditions that consumer 1 wi..
In a recent year, a bank earned $12 million in interest on its assets of $177 million, it paid out $8 million in interest on its liabilities (excluding capital) of $172 million, and it paid its workers $3 million in total compensation. The bank's spr..
Ceteris paribus, there is an inverse relationship between price and quantity demanded. In other words, the demand curve for a good a negatively sloping. Can a demand curve still be negatively sloping of the marginal utility of the good is
q1. cross-price elasticity. b.b. lean is a catalog retailer of a wide variety of sporting goods and recreational
Determine impact on income of a 50 increase in government spending from 250 to 300. Using original data, compute impact of a 50 decrease in taxes from 125 to 75.
Explain how does the existence of money reduce the costs of making transactions, relative to a society based entirely on barter.
Your firm’s research department has estimated your total revenues to be R(Q) = 600Q – 4Q2 and your total costs to be 60 + 2Q2. (Note that MB = 600 - 8Q and MC = 4Q). What level of Q maximized net benefits? What is marginal benefit at this level of Q?
The movement in the direction of a market-based system with freely determined prices, competition, profits, private ownership, and other features of capitalism is not simple. Discuss some of the challenges associated with an economy transitioning fro..
Which dominant Comparative politics theoretical approach might help us understand why US and Britain adopted Presidentialism and Parliamentialism governing systems?
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