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Analyze a two-period model for the market of computers in which two firms operate. Firm 1 only produces in period 1 and is endowed with an old technology providing a quality level vO to consumers. Firm 2 is a potential entrant in period 2 and it is able to produce an old technology, vO, and a new technology, vN . However, the production of new technology requires an innovation cost of I > 0. Note that old and new technology can be nondurable (only last one period) or durable (it lasts for two periods). Hence, the cost of producing nondurable technology, cND = 0, is considerably lower than the cost of durable technology, CD = 3. There is only one consumer in period 1 who seeks to buy a computer for the two periods of her life. In period 2, one additional consumer enters the market and seeks to buy a computer. Both consumers have the same gain from the quality of the technology embedded into the product they buy in period t. That is, V N = 7 and V O = 5 for new and old technology, respectively. The structure of the two-period, two-firm game is as follows: In period 1 firm 1 sells the old technology product and therefore has to decide which price to charge (p1) and whether to produce a durable (D) or a nondurable (ND) product. In the second period, firm 2 obviously chooses to produce a nondurable good (since the world ends at the end of period 2) and hence has to decide whether to invest in adopting the newer technology and price (p2).
Decreasing returns to scale imply that. When average cost is falling, marginal cost is ____________ and when average cost is rising, marginal cost is _________________. If the price of an input changes, there will be a new expansion path. As long a..
Assume the demand function for basketballs is given by QD = 150 −3P + 0.1I, where P = price of a basketball, and I = average income of consumers. Also, assume the supply of basketballs is given by QS = 2P. If the market for basketballs is perfectly c..
A local golf course just bought a lawn mowing machine. It comes with 2 yr free maintenance. The manager wants to provide enough money in an 8.00% bank account now (EOY -0) to have a fund out of which he will pay for needed maintenance.
Suppose that during the past year, the price of a laptop computer fell from $2,650 to $2,430. During the same time period, consumer sales increased from 495,000 to 664,000 laptops. Calculate the elasticity of demand between these two price–quantity c..
We are all familiar with fluctuating prices of gasoline at the pump. Explain why does this happen.
Three years ago, you purchased 192 shares of IBM stock for $101 a share. Today, you sold your IBM stock for $117 a share. For this problem, ignore commissions that would be charged to buy and sell your IBM shares and dividends you might have received..
Select multiple marketing channels and discuss how the channels will work together to promote the product/Marlboro cigarettes. If Malrboro Company already uses multiple marketing channels, suggest a possible strategy to improve sales using a differen..
q.pcc and cdw are two online retailers which compete in an internet market for digital cameras. their products are some
You produce goods in a competitive market. You discover that the marginal cost of the last good you produced is the same as the market price for the good. You should:
Write an essay about each of the IPE perspective has at its center a fundamental value or idea. What is the central idea of mercantilism, of liberalism, and of Marxism?
Indirect price discrimination differs from direct price discrimination because:
What does the interpretation of the law in this case suggest to businesspersons who sell products labeled with statements mandated by federal and state law?
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