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Suppose a firm has become a monopolist in the market for DVD players (remember those?). The market that lasts for exactly two periods (after 2 periods everyone switches to a newer technology). A DVD player is a durable good, so if it is sold in period 1 it can be used in period 2. Demand for the use of a DVD player for 1 period is described by P(Q) = 400 - Q (demand is the same in both periods). Consumers who purchase a DVD player in period one may either use the DVD player again in period 2 or resell it to another consumer. The firm can produce DVD players in either period at a marginal cost of zero. To simplify the math, assume the firm does not discount future profits (δ = 1) and that used DVD players are just as good as new ones. 1. Suppose the firm decides only to rent DVD players with single period contracts. If the firm is behaving optimally how many DVD players does it decide to rent in each period? 2. What is the price of DVD player rental in each period, and what is the firms total profits. 3. Now suppose the firm sells DVD players rather than rents. Also assume that the firm can commit in period 1 to how many DVD players it will sell in both periods. What is the optimal strategy for the firm. How many DVD players does it sell in each period? 4. What are its total profits from this strategy? 5. Compare profits from the rental market to profits from selling with commitment. Why are they similar or different? 6. Compare the price of rental in period 1 to the price of DVD's in period 1 when the firm can commit. How are they similar or different?
Assume a bank has $200,000 in deposits, a needed reserve ratio of 10%, and bank reserves of $50,000. Then the bank can make new loans in the amount of?
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During that summer, he charged $1.69 each gallon for unleaded gas during daytime & $2.59 each gallon at night,
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Find the breakeven discount rate such that the net present value of this development opportunity is zero and will the future value of this investment be sufficient to compensate those that suffer damages in year 20?
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describe at least two 2 situations in which you have employed self-handicapping in the past. what would the costs
Calculate the slope of the AE curve and the size of the multiplier if MPS = 0.20. Then, calculate the revised slope of the AE curve and the multiplier when you know that the imports and the marginal tax rate will reduce the slope of the AE curve by a..
How does a decrease in U.S. interest rates affect the EU/U.S. exchange rate? Use the carry trade to predict the impact of lower U.S. interest rates on Euro/$.
the market basket for an imaginary consumer is given below as are the prices over the course of three
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