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Consider the horizontal quality model on the unit interval from 0 to 1. There are Nconsumers located uniformly along the interval. There are two firms, with zero marginal costs, initially located at 0 to 1. Consumers will buy one unit of the good from the lowest cost retailer as long as the effective price is below V. They have transportation costs of t getting from their location to the store and back.
1. If both firms locate together at the middle, what is the equilibrium price?
2. Show that firm 1 has a profitable deviation from locating at the middle with the other firm.
3. Show that if firm 1 moves away from firm 2, firm 2 will want to deviate as well.
4. Explain why there is no pure strategy Nash equilibrium in this game.
5. In principle, what objects must on solve for to find the mixed strategy equilibrium?
What is the effect of the $400 increase in government spending and a $600 tax cut on the following indicators, ceteris paribus: (1) the change in output (GDP), (2) annual budget deficit, (3) in what context should the policy be used. Use a mpc of .75..
q1. kieso company borrowed 710000 on a 120-day note at 14 percent interest. the money was borrowed for 45 days in 2011
Describe the differences between shortages and scarcity. In answering this question you should think difference between the short run and the long run in economic analysis.
Represent graphically the effects of an expansionary monetary policy and a contraction fiscal policy in the IS/LM/FX model.
Let's explore the concept of willingness to pay with a thought experiment. Imagine a specific sporting, entertainment, or cultural event that you would very much like to attend -perhaps a World Cup match, the seventh game of the World Series, a Rolli..
In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1...
A price taking firm chooses its inputs to maximize long-run profits. Labor and capital are substitutes in production and both exhibit decreasing returns to scale, q(L, K) = L^(1/2) + K^(1/2) . The output price is 100 and the price of each of the inpu..
Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, Illustrate what was the real interest rate you paid.
Suppose there is an options market in SO2 permits, where each permit entitles one ton of SO2 emissions. Suppose that running a scrubber costs $65 per year per ton of SO2 removed, has a capital cost of $30,000,000, and an expected life of five years. ..
Which of the following is the best definition of money? 1) anything generally accepted as a payment for goods or repayment of debt 2) anything that is a liability of the federal government 3) anything that is a liability of a commercial bank 4) coins..
Explain why consumer ratings are so very important to consumers today. The reality of it is that consumers are willing to take the word of a perfect stranger over that of a credible company. Aside from the profit motives of the company, why is this p..
The settlement requires KopyKat to pay the employee $10,000 per month for the next year. Determine the optimal price and output for the firm under these new conditions.
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