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1.) Which one of the following sets of circumstances could the existence of economies of scale cause in a market?
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- COURSE: MICROECONOMICS - Stackelberg ModelIn a given market good there are only 2 firms that satisfy the demand, and their respective total cost functions are: CTi = 400 and the demand that is estimated is P = 120 - 2QIf the exception variable of both firms is the quantity they will produce, such that the decisions to produce are made sequentially firm number 1 will be the leader who decides the quantity to produce and firm number 2 (follower) decides based on the production of firm number 1, we ask:(a) quantity produced by each firm and its equilibrium price in the market.(b) Profit of each company at equilibrium and (c) Graph your resultsd) Explain what is meant by the term Paretooptimality.Explain whether the Pareto criterion is an efficiency criterion or a distribution criterion.Is the equilibrium of free competition Paretooptimal? p=320– 2x, e) Market demand for an item is provided by where p is the price of the p= 20+x. item and x is traded quantity. The market supply curve is provided by Find the market equilibrium during free competition and calculate the consumer surplus, producer surplus and socio-economic surplus.Illustrates graphically.You work for a Nova Scotia Company trying to successfully enter the cranberry market in Australia. What is the difference in how business is conducted in the entry country (Australia) versus Canada? Special attention should be given to ethics, formality, and communication styles including negotiations
- Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: aKc = 3, aKF=1, aLc = 2 and aLF = 4. Suppose that this economy has 100 units of capital and 150 workers. (c) Suppose that the world price of computers is $16 and the world price of food is $12. Assume that the Home country produces both goods. What are the free trade factor price levels W and R? (d) How many computers and units of food will the economy produce? (e) Suppose that the endowment of labor increased to 200. Compute the new equilibrium wage, rental rates and quantities produced in the new equilibrium. Provide the intuition of your results.Consider a country that produces computers (C) and food (F) using capital (K) and labor (L). Both industries are perfectly competitive. The factors of production are complements. As a result, unit factor requirements are fixed and given by: aKc = 3, akr = 1, aLc = 2 and ALF 4. Suppose that this economy has 100 units of capital and 150 workers. (c) Suppose that the world price of computers is $16 and the world price of food is $12. Assume that the Home country produces both goods. What are the free trade factor price levels W and R?(a) How many Frisbees are being sold in equilibrium? (b) How many (identical) firms are initially producing Frisbees? How much profit is the typical firm making? In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price down to average total cost, thereby eliminating profits. At what equilibrium price are all profits eliminated? How many firms will be producing Frisbees at this price?
- Evaluate the following statements.10. (4) Why would you expect sellers of branded goods with high upfront research and development costs to be more interested in free trade than producers who do not incur any fixed costs? 11. (8) Focus attention on the Ricardian model, the Heckscher-Ohlin model, and the monopolistic competition model if trade. Consider the intra-industry trade index for each model. What value for the index does each models predict? Explain your answer.Consider a market where two firms produce the same product, and compete by choosing the price to charge consumers. There are no capacity constraints and no fixed costs. Consumers purchase from the firm that charges the lowest price, Pmin Aggregate demand is given by Q(Pmin) = 600 – 30pmin. Both firms have marginal costs of c = 15. What is the aggregate quantity produced in this market? And what price do consumers pay? (a) p₁ = = 15, p2 = 20, Q = 150 (b) P1 = P2 = 15, Q = 150 (c) P₁ = P₂ = 20, Q = 0 (d) p₁ = 10, P2 = 15, Q = 300 (e) None of the above options is correct.Suppose there are two pharma companies (A and B) vying to develop the first vaccine to cure AIDS. Assume a fixed MC across the two firms MCA = MCB = 4. Assume further that they both face a market demand of P = 12 -0.00004Q and Q=QA + QB. (a) If firm A is able to enter the market first before firm B, what model would you use to depict this scenario? Why?
- An Australian firm and a US firm produce a homogeneous good that is sold only in Japan. The marginal cost of producing the good is constant and equal to 30 in both countries. The demand curve for the good in Japan is: P = 120-Q where Q = QA +QUS represents the sum of the quantities. produced by the Australian and the US firms, respectively. (b) Assume the Australian firm can commit to an output before the US firm. Solve for the Stackelberg Equilibrium price, sales and profits of each firm in Japan. Price profit AUS2 ,output_US2 profit_US2 output_AUS2Consider two identical countries (H and F) with the same individual firm's inverse demand function: P₁ = A - Bq₁. Firms differ in their marginal costs, c. Firms in country I want to sell their products in Country F through export or horizontal FDI. Firms need to pay the unit trade cost t when exporting. If the firm chooses to undertake FDI, the firm needs to pay a fixed cost, F. (a) Solve the profit function for firms with marginal production costc, in the domestic market (7), export market (*) and the profit if undertaking FDI (7) in terms of A, B, t, F and c. (b) Based on our discussion in class, low - c firms are more likely to participate FDI. Solve the cutoff marginal cost for undertaking FDI. i 3 1. Consider two identical countries (H and F) with the same individual firm's inverse demand function: P = A - Bqi. Firms differ in their marginal costs, c₁. Firms in country H want to sell their products in Country F through export or horizontal FDI. Firms need to pay the unit trade…3-) Use the following information to answer the questions below: The Kentucky Coal Company sells its coal in a nearly perfectly competitive market. It estimates its total costs of production as TC=1000+40+0.0502 where Q-tons of coal per day. a-) What is the fixed cost for this firm? b-) What is the total variable cost when quantity is 10 units? c-) What is the marginal cost of producing 10 units? I P(S) 15 ATC 10 S A 125 150 160 4-) How much profit does the profit-maximizing monopolist pictured in the diagram have? MC