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1. (a) Suppose that firms in this industry maximize their sales revenue, taking prices as given, subject to constraint that profits must be nonnegative. What is the equilibrium in this industry if there are precisely six firms?
(b) What would be the equilibrium if three of the six firms were profit maximizers and three maximized revenue?
(c) Now suppose that all firms are revenue maximizers, taking prices as given, subject to a zero-profit constraint. Why is it difficult to contemplate an equilibrium in a case where there is free entry?
2. Suppose that the industry has six firms, each of which seeks to maximize its use of capital, subject to a zero-profit constraint (Firms continue to be price-takers.) What is the equilibrium in this case?
If the cost of the fireworks display is divided equally among the citizens, will a majority vote be in favor of the display?
Suppose a firm produces its output in two different plants. Production costs at plant 1 are given by C1 = 4(Q1)2, where Q1 is the amount of production at plant 1. The production costs at plant 2 are given by C2 = 2(Q2)2
Suppose that each firm that tries to produce autos must go through the shakedown period of high costs on its own. Under what circumstances would the existence of the initial high costs justify infant industry protection?
When the price of ham is $7 per pound, John buys 3 fish per week. When the price of ham rises to $13 per pound, John buys 7 fish per week. Find the cross-price elasticity of demand for fish for John.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you co..
Pete and Lisa are entering into a bargaining situation in which Pete stands to gain up to $5,000 and Lisa stands to gain up to $1,000, provided they reach agreement. Who is likely to be the better bargainer?
assume that the interest rate on a one year bond is 7 percent today and the interest rates expected on one year bonds in the future are 6 percents in 1-year, 5 percent in 2-year , and 4 percent in three years bond. according to the exceptions theo..
A man wishes to set aside some money for his daughter's college education. His goal is to have a bank savings account containing an amount equivalent to $20,000 in today's dollars at the girl's 18th birthday. The estimated inflation rate is 8%.
"Historians and archaeologists will one day discover that the ads of our time are the richest and most faithful daily reflections any society ever made of its whole range of activities."
Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2.
Illustrate your answer by assuming that with advertising, a firm's demand curve has price elasticity of -1.5 and without advertising, it is -2. If MC is $10, what is the difference in the profit-maximizing price.
Assume that the company is currently producing 248 units of output per day using 2 units of X and 4 units of Y. The daily cost per unit of X is $135 and that of Y is also $135. Would you recommend a change in the present input combination.
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