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Suppose two firms engage in Cournot (quantity) com- petition in a market described by the following demand curve: Q(p) = 40 − 2p. (1) Assume that the firms each have marginal costs equal to zero. Let q1 and q2 be the quantities produced by each firm and let the aggregate quantity be Q = q1 + q2. (a) As a benchmark, calculate the equilibrium price and quantity in this market under perfect competition. Calculate the equilibrium price and quantity if there was only a monopolist in this market (who was unable to price discriminate). Are these equilibria efficient? Explain why or why not. (b) Graph the market. Calculate the equilibrium price and quantity under two firm, Cournot-style competition. Calculate each firms profits. Illus- trate the equilibrium on your graph along with the relevant welfare measures (producer surplus, consumer surplus, etc.). Is the market operating efficiently? Give an intuitive explanation of why or why not. (c) Suppose that this is a dynamic game: in the first period, firm 1 acts like a monopolist. In the second period, firm 2 enters the market. Suppose that, in the first period, firm 1 chooses the monopoly equilibrium you calculated in part 1a. Further, assume that firm 1 is unable to adjust its quantity in the second period. 1 If firm 1 cannot adjust her quantity, how much will firm 2 produce? Calculate each firms profits, price, and quantity sold in each period. 2 Does firm 2 fare better or worse in this dynamic game relative to the standard Cournot game in part 1b? Suppose that the scenario is the same as than in part 1c, except that firm 1 knows that firm two may enter the market in the second period. Further,. suppose there is a fixed cost of 2 that the entrant must incur should she enter the market in period 2. Calculate the best (profit-maximizing) strategy for firm
Assume that b=1/2 and that initially the real interest rate is equal to the marginal product of capital at 3%. As well, assume that v=2 and that the inflation rate last period was 2%. Assume the natural rate of unemployment is 5.5%. The Sequester is ..
Tell me about ancient Greek Economic thought with respect to: Markets vs. the household 2) Value and Wealth 3) Private Property. What is the nature of the revolution that Heilbroner talks about in his Chapter “The Econoimc Revolution”?. What Role did..
q.as an analyst at the treasury department you have been asked to predict the behavior of key macroeconomic variables
q1. two automatic systems for dispensing maps are being compared by the state highway department. the accompanying
A fast-food company spends millions of dollars to develop and promote a new hamburger on its menu only to find out that consumers won't buy it because they don't like the taste. From an economic prespective, the company should?
What can government do to encourage the development of new technology? What are the two key characteristics of public goods? Name two public goods, and explain why they are public goods. How can the free rider problem be overcome?
Twin deficits occurred in the 1980s reveal that huge government budget deficit may result in trade deficit. However, by the late 1990s, the federal budget deficit had moved into surplus, but the current account deficit widened. Can you explain the ca..
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Brian is the 99% shareholder, president, and director of Arapine Corp. He frequently uses the corporation credit card for his personal expenses. If Arapine is insolvent and unable to pay its debts, and the corporation’s creditors sue Brian personally..
Monetarists argue that:
A firm currently uses 100 workers to produce 200 units of output per day. The daily wage (per worker) is $80, and the price of the firm's output is $50. The cost of other variable inputs is $600 per day. The firm’s fixed cost is 8,000. The marginal c..
The Delphi method used for forecasting:
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