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An incumbent firm, Firm 1,faces a potencial entrant, Firm2,that has a lower marginal cost.The market inverse demand function is p= 120 -Q1-Q2.Firm 1 has a constant marginal cost of $20,while firm 2 is $10 and they have no fixed cost.
1. What are the nash-cournot equilibrium price, quantities, and profits without government intervention?
2. To block entry,the incumbent appeals to the government to require that the entrant incur extra costs. What happens to the nash cournot equilibrium if the legal requirement causes the marginal cost of the second firm to rise to that of the first firm,$20?
Consider and economy with the following production technology: Y = 9K1/3 L2/3 , where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Compute the equilibrium wage and capital return. b) Compute total p..
A monopoly firm faces an (inverse) demand curve of P = 196 – 28Q^0.5 + Q and has a constant marginal (and average) cost curve of 49. If the firm can perfectly price discriminate, what are its profits; what are the consumer surplus, producer surplus a..
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Discuss the summary below and include your thoughts, opinions, questions, observations, disagreements, etc. relating to the summary. The Relation between Economic Freedom and Political Freedom. There is an intimate connection between politics and eco..
For a company having a beta of 1.1, a current stock of $40 per share, and an expected dividend this coming year of $2.80 per share, what is projected stock price one year from today? (Find P1). Assume the market risk premium is 12% and the risk free ..
Someone derives equal satisfaction from seeing 3 movies or 1 play. His tastes therefore can be represented by U= M+3P. If he has $160 each period in her theatre-going (movie and play) budget, and the price of a movie is $8 while the price of a play i..
The Lange-Lerner model of market socialism of the text, is a system in which central planners try to arrive at competitive prices through trial and error. When a surplus of a good exists, the planners are supposed to lower its official price. When a ..
Suppose the interest parity condition holds and that the domestic interest rate is greater than the foreign interest rate. What does this imply about the current versus future expected exchange rate? Explain. Suppose the one-year nominal interest rat..
Assume that economic growth is slower in the United States than in its trading partners. Given a system of floating exchange rates, will the impact of this growth differential be for the United States with respect to exports and the value of the doll..
An existing company is considering expanding into a new product line that will use the same factory as its existing products.
Suppose the own price elasticity of market demand for retail gasoline is -0.7, the Rothschild index is 0.5, and a typical gasoline retailer enjoys sales of $2,000,000 annually. What is the price elasticity of demand for a representative gasoline reta..
How is the growth of the labor force helping to prevent inflation? support the answer with a graph. What would happen if aggregate demand continued to expand but the growth of the labor force slowed? how would this situation be depicted graphically?
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