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Exercise 1: A monopolist manufacturer sells to a monopolist retailer. Suppose the final consumer demand for the good at the retailer level is P = 200 – 4Q and the costs for the manufacturer of producing the good are represented by TC = 40Q + 10. The wholesale price is the only cost of the retailer. Calculate the profit of the retailer and of the manufacturer. Exercise 2: A monopolist manufacturer sells to competitive retailers. The competitive retailers currently provide no services for the manufacturer’s good. Suppose the final consumer demand for the good at the retailer level is P = 100 – Q and the costs for the manufacturer of producing the good are represented by MC = AC = 20. Currently, the manufacturer sell the good to the retailer at w = 60. 1. Calculate the profit of the retailers and of the manufacturer The manufacturer wants to increase its profits and has the option to use a RPM. Therefore retailers would have to set a minimum price of 80 and continue to sell the good to the retailers at w = 60. The retailers must invest in publicity in order to attract customers. Demand increases to P = 150 – Q. 2. What would be the profit of the manufacturer in this case? Will he set the RPM? The CEO of the manufacturer has another idea to improve the profit. He can merge with retailers in order to control the good market. In order to have the increased demand he will have to pay $1000. 3. What will he choose? What is the maximal price that the manufacturer will be OK to pay for the merge? Exercise 3: You are the manager of the unique supermarket of the town. A local company wants you to sell its milk. But you have already many other milk in you supermarket. You estimate that you would be able to sell 500L/day of this milk at p = 2. You know that the marginal cost of the local company is 0.5$/L but the manager propose the milk at 1$/L (and will never accept to sell it for less). a. What will be your profit if you accept the deal? b. What kind of tariff can you propose to the local company in order to improve your profit? c. What is your maximal profit in this case?
There are many “in-kind” versus cash payments made by the government to citizens such as food stamps, medical care, and public housing. Use an indifference curve/budget line diagram for “food” and “all other goods” to demonstrate that receiving food ..
______ signals that a recovery is coming, and is a condition to be expected at the trough of the business cycle.
Franklin Templeton has just invested $9,860 for his son (age one). This money will be used for his son’s education 20 years from now. He calculates that he will need $31,603 by the time the boy goes to school. What rate of return will Mr. Templeton n..
Until the 1977 Supreme Court decision in Bates v. State Bar of Arizona, all states prohibited advertising by attorneys. That decision gave constitutional protection to an attorney’s right to advertise the availability of their services and the fees t..
Select a country of your liking (except the United States), and identify its key resources and major exports and imports. Decide whether the country’s trade pattern supports the Heckscher-Ohlin Theorem. Provide evidence to your findings. Make sure to..
If the demand for a commodity is elastic, an increase in the price of the commodity. Assume the cross price elasticity of demand for products A and B is positive.
Define and discuss the concept of Corporate Communication. Select an organisation and then identify and discuss the issue that are continuous risk for the survival of the organization.
Assume that a new project will annually generate revenues of $2,100,000 and cash expenses (including both fixed and variable costs) of $500,000, while increasing depreciation by $250,000 per year. In addition, the firm's tax rate is 37%. Calculate th..
Illustrate what is the expected return of the remaining portion of Peggy's portfolio.
Describe the possible barriers to entry and exit for: (a) a physician wanting to establish a solo practice office in internal medicine, (b) a company offering a health club facility in the same building where employees work, and (c) a tertiary hospit..
It is believed that education provides a positive externality (i.e. an external benefit) to society that would not be exhibited in a free market for education.
which of the 3 determinants of macro performance (internal market forces, external shocks, and policy levers) would you consider the most important in terms of gauging the success/failure.
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