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Consider two firms, A and B, which simultaneously set prices in every period. Firm A has marginal cost of cA = 6, while firm B has marginal cost of cB = 10. Assume no fixed cost. Market demand in each period is given by
Q (p) = 100 - 2p
Which price would firm A charge if it was a monopolist? Firm B?
What are the Bertrand equilibrium price, output, and profits?
Suppose the two firms start to collude in the following way: They agreed to play a Grim Trigger Strategy and charge firm B’s monopoly price. Calculate the critical discount factor.
Suppose the two firms were symmetric, i.e. they had the same marginal cost, cA = cB = 10. Would collusion become easier or harder to sustain?
Suppose now that they compete in quantities in a Cournot duopoly when cA = cB = 10. Calculate the critical discount factor.
The charter boat fishing industry has a marginal benefit (demand) for fishing trips out of Irondequoit Bay which can be expressed as a linear function of the price of the trip and the number of trips taken out of the port. This marginal benefit curve..
What kind of unemployment do many commentators propose is dominant following the Great Recesison? Explain what’s going on here.
In the Solow model with technological progress, consider an economy that begins in steady state with a rate of technological progress, g, of 2%. Suppose that g rises permanently to 3%. Assume α = 1/3. What is the growth rate of output per worker befo..
Rumors and discussions lead me to believe that the fed will increase interest rates early this fall. I've also heard and read that we NEED to increase our rates now to be prepared for the next economic down-turn. What does this all mean? How will thi..
Stan Money maker needs 16 gallons of gas to top off his tank. I he drives an extra 8 mile round trip Stan can save an extra $0.05 a gallon. Suppose gas costs $3.10 per gallon and Stan gets 24mpg. Each mile driven gives off CO2 that has an environment..
Classify this production function by returns to scale. Comput the firms long-run cost function.
Calculate the firm's inverse demand function. Calculate the firm's marginal and average cost function. Find all values of Q that satisfy the first order condition for the firm's problem. Calculate the firm's profit maximizazing price and quantity.
Which of the following is a microeconomic consequence of inflation?
describe how each of the 4 factors contributed to the elasticity of the good. Is the product considered elastic, inelastic, or unitary elastic.
The ATS Railroad runs a freight train daily between Chicago and St Louis. Two major groups of customers use this service: beef distributors and wheat growers. The demand for freight cars is given by the following equations: Qa 50-0.125P for the beef ..
We defined marketing as, “the art and science of getting people to spend their money on your product rather than the other guy’s, and be happy that they did so.” Do you think that’s true? Does some Wizard of Oz person-behind-the-curtain get you to bu..
The purchase price of a natural? gas-fired commercial boiler? (capacity X) was $175,000 eight years ago. Another boiler of the same basic? design, except with capacity 1.46?X, is currently being considered for purchase. If the cost index was 162 for ..
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