Assume Bertrand price competition in which the quantity that consumers' demand from firm i is a - pi when pi < pj and 0 when pi > pj and (a-pi)/2 when pi = pj. Suppose also that there are no fixed costs and that marginal costs are constant at c, where c < a. What is the Nash eq?
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- 2. Consider a quantity competition setup with two firms simultaneously choosing the quantities. Themarket demand function is given by P = 100 − Q. The total cost function of a firm is given by T Ci = F + 10qi if qi > 0 0 otherwise. (a) For what value of the fixed cost F, we are going to have multiple equilibrium? (b) For what values of the fixed cost F, we are going to have at least one firm producing zero quantityas an equilibrium?Suppose Ginger's Spice Company sells paprika in a perfectly competitive market and is producing her profit-maximizing level of output. Suppose further that at this level of production her average fixed cost of producing one kilo of paprika is $8, her average variable cost is $18, and her marginal cost is $25. Over time, there will be in the number of sellers of paprika, everything else held constant. Select one: O A. a decrease OB. an increase O C. no changeA firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.
- The figure deplcts the demand curve for Beautiful Cars, and the marginal cost and Isoprofit curves of the car manufacturer. The quantity and price at polnt E are (Q*. P*) - (30, 5,500). Suppose now that the firm Increases the price to 5,550 and chooses the corresponding level of output from the demand function at the new price. Based on this Information, whlch of the following Is correct? 8,000 Demand curve 100 Quantity of cars, O O The firm will sell 30 cars at the higher price. O The firm's profit remains the same. O The quantity of cars produced reduced. O Tho firm's profit is now incroasod Price, Marginal cost ($)Figure A Competitive Firm1.2 MC ATC AVC Given Pl =$7.00 P2 $8.50 P3 =$9.20 QI=100.00 A P3 B P2 P1 MR Quantity Q1 Refer to Figure A Competitive Firm1.2. At an output level of Q1, the average fixed cost is about O $0.70 O No answer text provided. O No answer text provided. O S0.80 %24The inverse Demand equation is: P = 1018 - 1.5 Q The marginal cost is given as: MC = 212 + 1.5 Q if the market is served by many competitive firms, the equilibrium Q is and P is f needed, round to two decimals for both Pand Q (P in $/s unit, Q in units/period). a. 268.67: 615.00 O b.282.81 : 676.50 Oc 410.00 : 1421.00 O d. 179.11: 749.33 O e. None of the asnwers offered are accurate.
- A company manufacturing laundry sinks has fixed costs of $100 per day but has totalcosts of $2,500 per day when producing 15 sinks. The company has a daily demand functionof q = 360 − p, where q is the number if laundry sinks demanded and p is te price ofa laundry sink. ) If production increases continuously, what is likely to be the average cost per sink? How many laundry sinks will the company need to produce in order to maximise it′s profits? What is the maximum profit?2. You are the Southeastern Michigan regional manager at Coca-Cola, responsible forproduction and pricing in the Metro Detroit area. Your primary competitor is Pepsi. The marketresearch team at Coca-Cola is thinking about launching a new product, Orange Vanilla Coke, toboost the brand. The cost function to produce a 12-pack of 12 fl. oz. cans of Orange VanillaCoke is C(qcoke) = 0.25qcoke and the market research team has estimated inverse market demandfor a 12-pack of this new “pop” in Southeastern Michigan to be P = 10.25 – 0.00025Q. a. Assuming Pepsi decides not to produce a similar product, allowing Coca-Cola to maintainmonopoly power in the market for orange vanilla cola, what price and quantity will youchoose to maximize profit? How much profit does Coca-Cola earn?b. What price and quantity you would choose to maximize profit if Pepsi spies discover yourproduct before launch, allowing Pepsi to produce and launch an identical product at the sametime. For your answer, assume the cost…For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. (a) Draw a large graph showing the Royal Mail’s average cost curve and itsmarginal cost curve. Show how many deliveries would be made, and at whatprice, if Royal Mail operated as a monopoly. Show the Royal Mail’s profit orloss on the graph.
- For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. (a) Draw a large graph showing the Royal Mail’s average cost curve and itsmarginal cost curve. Show how many deliveries would be made, and at whatprice, if Royal Mail operated as a monopoly. Show the Royal Mail’s profit orloss on the graph. (b) The government makes a law restricting the price of postage to £1. Show theeffect of this policy in the…For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. The government makes a law restricting the price of postage to £1. Show theeffect of this policy in the short-run in a new, large graph. The graph shouldshow the firm’s average cost, marginal cost, marginal revenue, and consumerdemand. How much postage is bought? Show on your graph if the Royal Mailis in profit or loss, and by how much.For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. New technology changes delivery firms’ technology. Now, the minimumaverage cost is £2 at 1 million deliveries and a minimum marginal cost of £1at 0.75 million deliveries. The government removes all price restrictions andallows free entry. Describe the long-term outcome for this market, using twographs, one at the firm-level and one at the…
