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Suppose a firm has become a monopolist in the market for DVD players (remember those?). The market that lasts for exactly two periods (after 2 periods everyone switches to a newer technology). A DVD player is a durable good, so if it is sold in period 1 it can be used in period 2. Demand for the use of a DVD player for 1 period is described by P(Q) = 400 - Q (demand is the same in both periods). Consumers who purchase a DVD player in period one may either use the DVD player again in period 2 or resell it to another consumer. The firm can produce DVD players in either period at a marginal cost of zero. To simplify the math, assume the firm does not discount future profits (δ = 1) and that used DVD players are just as good as new ones. 1. Suppose the firm decides only to rent DVD players with single period contracts. If the firm is behaving optimally how many DVD players does it decide to rent in each period? 2. What is the price of DVD player rental in each period, and what is the firms total profits. 3. Now suppose the firm sells DVD players rather than rents. Also assume that the firm can commit in period 1 to how many DVD players it will sell in both periods. What is the optimal strategy for the firm. How many DVD players does it sell in each period? 4. What are its total profits from this strategy? 5. Compare profits from the rental market to profits from selling with commitment. Why are they similar or different? 6. Compare the price of rental in period 1 to the price of DVD's in period 1 when the firm can commit. How are they similar or different?
Suppose that the domestic demand and supply for shoes in a small open economy are given by. what will the levels of production and consumption be under free trade? Will the country be an exporter or importer if the world price is $50? How much will i..
Consider a firm in a perfectly competitive industry. The firm has just built a plant that cost $1,700.Each unit of output requires $14 worth of materials. Each worker costs $11 per hour.The firm's production starts at 300 units with 1 worker (40 h..
An estimate of the physician’s marginal product rises up to 25 hours and then slowly falls to zero at 110 and thereafter negative. Graph both the marginal and total products of labor based on this information.
mikes cafe is a profit-maximizing competitive coffee shio. mike charges 2 per cup. his total cost each day is 150 of
the following production table provides estimates of the maximum amounts of output possible with different combinations
You borrowed $20,000 to finance the education expenses for your senior year of college at the beginning of your senior year. The loan will be paid off over five years and the first instalment will be due a year later. The loan carriers and interest r..
State the commodity in which each country has absolute advantage amd identify the commodity of comparative advantage for each country
1. what is the consumption function and how is it related to the marginal propensity to consume?2. what is the
The demand in Japan for new automobiles is elastic and sensitive to market prices. Given that, describe the effect of each of the following on the quantity demanded or the demand for new autos in Japan.
A firm has enough retained earnings to finance an investment project. For this firm, the market interest rate:
cemex and holcim are two cement manufacturers in durham. they produce cement and sell it into a competitive world
A road building contractor has received a major highway construction contract that will require 50,000 m^3 of crushed stone each year for 5 years. The stone can be obtained from a quarry for $7.80/m^3. As an alternative, the contractor has decided to..
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