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Consider a market with two identical firms. The market demand is P = 26 – 2Q, where Q = qa + qb and the firms cost structure is such that MCa=MCb=ACa=ACb=2. a) Solve for the Cournot reaction functions of each firm. b) Solve for the Cournot-Nash equilibrium. Calculate the quantity of each firm, the market price, and the profit of each firm. c) Solve for the Stackelberg equilibrium assuming that firm a is the leader. Find: the quantities produced by each firm, the market price, and the profit of each firm. d) Solve for the output and price under perfect collusion (note: perfect collusion is a synonym for joint profit maximization or cartel). e) Now assume the market is perfectly competitive, what is the equilibrium market price and quantity? f) Use your answers above to rank from best to worst the above equilibria (Cournot, Stackelberg, perfect collusion, and perfect competition) according to: • Allocative efficiency • Industry profit (sum of firms’ profit)
A monopolist has two specific demanders with demand equations: qA = 10 – p and qB = 10 – 2p. This monopolist implements an optimal two-part tariff pricing scheme, under which demanders pay a fixed fee a for the right to consume the good and a uniform..
Consider palletizer at a bottling plant that has a first cost of $141493, has operating and maintenance costs of $17669 per year, and an estimated net salvage value of $48604 at the end of 30 years. Assume an interest rate of 8%. What is the future w..
Which of the following statements is correct? a. Long-run total costs are the sum of fixed costs and variable costs. b. Short-run total cost curves are an “envelope” of their respective long-run curves. c. Long-run total cost curves are an “envelope”..
how much would the original $20,000be worth in three years? What is the present value of the $25,000? Which option should Howard choose?
You are the head of the central bank and you want to maintain 2 percent long - run inflation, using the quantity theory of money. If the real GDP growth is 4 percent and velocity is constant, what must the growth rate of money be to the inflation tar..
Consider a market where the market demand is given by P = 600 − 3Q and the market supply is given by P = 100 + 2Q. Suppose the government imposed a $50-per-unit tax. How much of the per-unit tax would be paid by the sellers and how much by the buyers..
what might prompt the government to establish this price ceiling? next suppose that the government establishes a price floor of $4.60 for wheat. what will be the main effects of this price floor?
q1. the third largest city of a country has a population of 12.5 million. using the ranksize rule what is the
The treasurer of a firm noted tha many invoices were received with the following terms of payment: "2%- days, net 30 days." Thus, if the bill is paid within 10 days of its date, he could deduct 2%. Or the full amount would be due 30 days from the inv..
Imagine that you have decided to open a small ice cream stand on campus called "Ice-Campusades." You are very excited because you love ice cream (delicious!) and this is a fun way for you to apply your business and economics skills! Use your knowledg..
The first sushi restaurant opens in town. Initially people are very cautious about eating tiny portions of raw fish, as this is a town where large portions of grilled meat have always been popular. What will happen to the short-run profit of the sush..
What is the equilibrium price in the market? What is the amount sold and bought?
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