Reference no: EM131238966
Let market demand in the trinkets industry be given by Q(P) = 55−P. There are only two firms in the industry, and the total cost function for each firm be given by C(qi) = 10 + 25q, where i = 1, 2.
1. Write down the market’s (inverse) demand function, that is, price as a function of each firm’s output, q1 and q2.
2. Write down the profit maximization problem of each firm. If both firms are Cournot competitors, what are they maximizing over?
3. Solve each firm’s maximization problem, write down each firm’s first order condition, and derive find the best-response function of each firm.
4. Suppose firm 2 produces nothing, that is, q2 = 0. What is firm 1’s optimal output level? How does this quantity with the monopoly output level?
5. Find each firm’s Cournot-Nash equilibrium output, profit, and the resulting equilibrium price in the market.
6. What is consumer surplus in equilibrium? How does it compare with consumer surplus under perfect competition?
7. Calculate the total surplus in this Cournot-Nash equilibrium. Is the equilibrium outcome Pareto efficient? If not, calculate the Dead-Weight-Loss (DWL) in this market.
8. Suppose that, observing profits made by incumbent firms, 6 new firms, identical to the first two, enter the market as Cournot competitors. How do equilibrium prices, quantities, and profits change? (Note: now there are 8 identical firms competing in the market for trinkets).
9. Are consumers better off? In other words, does their consumer surplus rise, fall, or stay the same? Explain your answer.
10. A ninth and identical firm is thinking about entering the market too. Explain why it will, upon further reflection, decide not to do so.
|
Describe elements of conflict resolution and peacemaking
: Locate an article concerning conflict resolution and peacemaking using the course readings, the University Library, and other resources. Prepare a 900-word paper in which you analyze your article. Describe elements of conflict resolution and peacema..
|
|
Causes for common-mode failures in distributed system
: What is a "safety case"?What properties of the architecture support the design of a "safety case"? List some causes for common-mode failures in a distributed system.
|
|
Who has a comparative advantage for each good
: Italy and France both have the resources to produce bread and wine. If Italy devoted all of its resources to either product, it could produce 150 gallons of wine or 600 loaves of bread in a given month. Determine and briefly explain who has an absolu..
|
|
Management scholars defined entrepreneurship
: Management scholars defined entrepreneurship as the "relentless pursuit of opportunity without regard to resources currently controlled." Using this definition, evaluate Shackelton's actions on the Endurance expedition. Was Shackelton an entrepren..
|
|
Write down the profit maximization problem of each firm
: Let market demand in the trinkets industry be given by Q(P) = 55−P. There are only two firms in the industry, and the total cost function for each firm be given by C(qi) = 10 + 25q, where i = 1, 2. Write down the profit maximization problem of each f..
|
|
Explain the simple model of the expenditure sector
: Explain the simple model of the expenditure sector without any government involvement
|
|
Thinking of advertising microsoft products
: You are thinking of advertising Microsoft products on a sports telecast. As you buy more ads, the price of each ad decreases as shown in the following table:
|
|
What is the probe effect
: Discuss the different steps that must be taken to investigate a real-world phenomenon by a formal method. Which one of these steps can be formalized, which cannot? What is the "probe effect"?
|
|
Discuss the costs and benefits of applying formal methods
: In Section 12.2.2, three different levels of formal methods have been introduced. Explain each one of these levels and discuss the costs and benefits of applying formal methods at each one of these levels.
|