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Two firms, A and B, engage in Bertrand price competition in a market with inverse demand given by P = 12 - Q. Firm A has a higher marginal cost: cA > cB . Whenever a firm undercuts the rival’s price, it has all the market. If a firm charges the same price as the rival, it has half of the market. If a firm charges more than the rival, it has zero market share.
(a) Suppose that cA = 8 and cB = 3. Find the Nash equilibrium of this game (pA,pB) where one of the firms charges its marginal cost
(b) Suppose that there are not 2, but n firms with different marginal costs. Any number of firms may also have equal marginal costs. Can we have a marginal cost structure where one firm earns a positive profit? Can we have a marginal cost structure where more than one firm earns a positive profit? Just explain the intuition without the math.
The marginal propensity to consume in an economy is 0.8. If the price level is fixed, a $400 increase in net exports would be expected to increase real GDP by how much?
A product has a negative income elasticity. What does that measure tell us about the product? Answer should be two paragraphs.
Suppose that a firm's only variable input is labor. The firm increases the number of employees from four to five, thereby causing weekly output to rise by two units and total costs to increase from $3,000 per week to $3,300 per week.
What are the production costs of your economics class? What are the fixed costs? The variable costs? What’s the marginal cost of enrolling more students?
A manufacturer plans to open a new plant. The new plant will cost $4,000,000 to build and make ready for production. Company management believes that the plant will produce a net profit of $150,000 in the first year and that profit will increase 5% p..
Discuss why marketers might change a positioning strategy over the course of a product/services life-cycle. Use a specific product or service to illustrate your argument.
First Bank has total deposits of $2,000,000 and legal reserves of $220,000. a. If the reserve requirement is 10 percent, what is the maximum loan that First Bank can make, and what is the maximum increase in the money supply based on First Bank's res..
Trace the problems inherent in the unequal distribution of the benefits produced by the American economic system. Focus on the efforts of labor to change that inequality and on capital to retain its favored position. Describe evidence of inequality a..
Describe some of the key decisions Apple management has faced within the past year or two. Identify an ethical issue the organization either faces or has faced in the past. If it has not been resolved, provide an analysis of how the issue should be a..
At approximately what interest rate level would a new equilibrium occur? What curve or curves would have to shift in order for this equilibrium to occur? What would happen to the economy in regards to the money market and output market if the governm..
The senate of Puerto Rico recently decided to raise the taxes on soft-drinks (Coca-Cola, Seven-Up, etc.) Graphically illustrate the effects of this tax on the market for hard liquor. Would a $1 increase in the excise tax on liquor increase the equili..
What is the marginal cost per bushel of apples produced? If the market price of a bushel of apples is $5.50, and is unaffected by the farmer’s production decision, then the marginal revenue of a bushel of apples is $5.50. In that case, how many bushe..
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