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Imagine that two cigarette companies are competing in a market. They each charge the same constant price p < 2 (taken as given). In order to increase their market share, they must advertise. Let a1 denote the number of hours of advertisement from firm 1, and a2 denote the number of hours of advertisement from firm 2. We assume that the cost from each firm i ∈ {1, 2} from advertising ai hours is given by a 2 i . We assume that, if firm i advertises ai units and its rival advertises a−i units, then the quantity demanded from firm i will be given by (1 + (ai − a−i)). a) Assuming that both players choose a1 and a2 simultaneously, show that setting ai = p/2 is a strictly dominant strategy for both players. 1 b) If the government imposes a regulation that prohibits each firm from advertising whatsoever (i.e., that specifies that a1 = a2 = 0), then would the firms become better off or worse off? What is the economic intuition behind this result?
They face a straight market demand curve that runs from $500 on the price axis to 1000 on the quantity axis.How much profit will they make at that quantity? Why is this firm a natural monopolist?
Imagine that you work for the maker of a leading brand of low-calorie, frozen microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April. Note
Find the effects of the increase in the expected future MPK on current output and prices from the AD-AS diagram based on the misperceptions theory. What accounts for the difference with part a?
A High End Department store has a replacement cost of $4,596,000. A fire caused $500,000 damage to the store's inventory. Find the amount the insurance company will pay if the store carried a policy with a face value of $3,500,000 and a coinsurance c..
q.1. a. differentiate between monetary policy instruments and monetary policy toolsb. describe the two key tools of
Set all variables to their baseline values. Elucidate how much money do consumers want to spend on spaghetti when the price.
As additional units are produced, the marginal revenue product falls for all firms because marginal product decreases. For firms operating in industries that are not perfectly competitive, marginal revenue product also falls because
Identify the four major tools of monetary policy. Describe how a change in the Fed’s major policy tools leads to [1] expansionary and [2] restrictive or contraction monetary policies.
q1. what is the capitalized cost of expenditures of 3000000 now 50000 in months 1 through 12 100000 in months 13
Assume that a painter produces 20 paintings this year and 20 paintings next year. What is the annual change in nominal GPD if the price of paintings rises from $1,000 this year to $1,500 next year? Can you conclude that the economy grew from this yea..
Ron supervises delivery of flowers for a wholesale distributor of fresh flowers, Flowers. Inc. In order to accommodate one of the company's best customers, Ron offers to immediately rush a delivery of fresh peonies. All of the delivery trucks are cur..
q1. you have an opportunity to invest in a new plant. the fixed costs are 100000 per year. the marginal cost of
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