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An incumbent firm, Firm 1, faces a potential entrant, Firm 2 that has a lower marginal cost. The market demand curve is P = 120 – Q. First 1 has a marginal cost of $20, while Firm 2’s is $10.
a) What are the Nash-Cournot equilibrium price, quantities, and profits if there is not government intervention?
b) To block entry, the incumbent appeals to the government to require that the entrant incur extra costs. What happens to the Nash-Cournot equilibrium if the legal requirement causes the marginal cost of the second firm to rise to that of the first firm, $20?
c) Now suppose that the barrier leaves the marginal cost alone but impose a fixed cost. What is the minimal fixed cost that will prevent entry.
The Townsville City Council is considering a proposal by the mayor to construct a recreational facility at a cost of $1.0 million. The facility is expected to have a useful life of 30 years during which operating costs are expected to average $100,00..
A small open economy with a floating exchange rate is in recession with balanced trade. If policymakers want to reach full employment while maintaining balanced trade, what combination of monetary and fiscal policy should they choose?
In the short run, labor is the only variable factor used by a firm in the production of a certain product. The manager of the firm has estimated that the marginal product of labor is given by MPL = 160/√L. The wage per unit of labor is w = $24, and e..
Given the short-run (SR) cost curve in the chart above for a firm in a perfectly competitive market, find the firm’s best output level and total profits when the market price is: a) $18, b) $13 c) $5 d) $3.
Briefly describe the national security implications of the dependence on imported oil. Politicians of both political Parties routinely discuss the concept of achieving energy independence. Describe the reasons why this is or is not a realistic goal.
The manager of a canned food processing plant is trying to decide between two labelingmachines. Determine which should be selected on the basis of rate of return with a MARR of 20%per year.
One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
Illustrate what are the values of the tax-adjusted utilize cost of capital, the desired future capital stock also the desired level of investment
Classify this production function by returns to scale. Comput the firms long-run cost function.
assume the tax multiplier is estimated to be 1.5 and the aggregate supply curve has its usual upward scale. suppose the government lowers taxes by 150 million. aggregate demand will increase or decrease and by how much?
Elucidate how each change mentioned in the article impacts upon the aggregate expenditure model.
An increase in the uncertainty of the future profit stream of projects will (assume no wealth effect or other change in the investment decision rule, or shift in the production function)
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