Calculate long-run effect of financial crisis on industry

Assignment Help Microeconomics
Reference no: EM13904982

Problem 1:

We believe that the market for shoes is perfectly comptive with the inverve demand function p = 200 - 0.5Q.

Each firm producing shoes has . upward sloping marginal cost

curve roc- 54, a U-shaped AVC cure and zero fixed costs. The AVC cure crosses the MC
curve at q = 4 for all firms except for 30 old. firms which are more efficient .d for them
the inteneution point at q = Call them 'old' firms, while others are Woungk

i. Explain what conditions must be satisfied in ord. for this market to be perfectly competitive.

ii.Calculate the equilibrium output, prix and the number of old and young firms if the market W. the long-run equilibrium.

iii. Economists predict that as a result of a global financial crisis consume, disposable income will fall considerably in the upcoming year and they could not afford purchasing as many shoo as they used to buy previously. If the demand function is expected to fall to p = 180- 0.5Q, calculate the short-run effect of the financial crisis on shoe industry. (Correct numerical answer will give you a full credit, a diagram will give you a partial credit)

iv. Calculate the long-run effect of the financial crisis on this industry.

Problem 2:

A restaurant has three types of customers. A third of its customers, Type A, are willing to spend $5 on an appetizer be only $2 on a desert. Another third, Type 13, are willing to spend $4 on an appetizer and $3 on a dessert. The remaining third, Type C, are willing to spend only $2 on an appetizer but $6 on a dessert. It costs the restaurant a constant $2 to prepare en appetizer or a dessert.

i: Which is the optimum pricing strategy for the restaurant if it cm perfectly price discriminate? What sill be the restaurant's profit and social welfare in this case?

ii. What will be the proffXrenidmiscing flexible bundling strategy when the restar¬t offers appetites and desserts separately and . a bundle? How much profit would the restaurant earn from this fladble bundling strategy? How big is social welfare a this case?

Problem 3:

A monopoly with constant marginal costs mc = $20 has two potential groups of customs, whose demands are Q1 = 100 - 0.8P and Q2 = 100 - 0 respectively and who cannot trade with each other.

i. If the monopolist were allow to perfectly p0 discriminate and use non-linear pricing schemes, what strategy would it use?

ii. Assume instead that the monopolist can identify the group type of each individual consumer but can charge only uniform Prices. Find the optimum pricmtuantity combination that the monopolist will set for each group.

iii. Now suppose that the monopolist only 'mows that there are two groups of consume. in the market with demand functions as above but is unable to identify the type of each individual consumer. What would be the profihmudmiting non-linear pricing strategy for the monopolist?

iv. Show on three different diagums the amount of profit the monopolist would earn . each case. Which strategy gives the highest profit and which gives the lowest (me diagrams only, no calculations required).

Reference no: EM13904982

What does the brand mean in today market

Building a brand is crucial exercise that often takes years or decades to accomplish. The benefit of brand equity is realized in the bottom line. You researched brand equity

What number of passengers will maximize profit

A major airline estimates that the demand and marginal revenue functions for first class and excursion fares from New York to Paris are: First Class: P = 4,200 – 2Q MR = 4,200

What are the sources of human capital

What are the sources of human capital? Discuss some specific examples - what is the law of diminishing returns? Give an example of what the law of diminishing returns implies.

Describe the current state of the health care industry

Identify and describe the current state of the health care industry. Also, in your paper list the pros and cons related to the health insurance industry along with a sho

Average fixed cost and marginal cost schedules

Problem-solving question: Use the following data on a firm’s total cost schedules to compute its average variable cost, average total cost, average fixed cost and marginal cos

Consider the following model for the latte market

Consider the following model for the Latte market. Suppose the aggregate demand for Lattes is given by Qd = 5 - P where P denotes the price and Q denotes the quantity of Latte

What is the efficient markets hypothesis

1. What is the efficient markets hypothesis? What are themost important characteristics of markets that are necessary for them to beefficient?2. How do stock prices behave if

How would it affect national wealth in the short-run

If U.S. national saving remained at current levels but investment (or gross investment) went down to, say, roughly 5% of GDP, the trade balance (or current account) deficit

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd