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Consider the horizontal quality model on the unit interval from 0 to 1. There are N consumers located uniformly along the interval. There are two firms, with zero marginal costs, initially located at 0 to 1. Consumers will buy one unit of the good from the lowest cost retailer as long as the effective price is below V. They have transportation costs of t getting from their location to the store and back. 1.If the firms sell to the whole market, derive the function governing demand to each firm as a function of the two prices. 2.Solve for the equilibrium price if both firms sell to the whole market. 3.What condition do we have to check to ensure that the firms sell to the whole market? 4.Solve for the equilibrium price if both firms only sell to a part of the market. 5.Suppose that firm 1 is located at a and firm 2 is located a b (without loss of generality, let 0 ≤ a < b ≤ 1). Show the profit function for each firm as a function of their prices and the location of both firms.
Monopolistic Competition- Consider a monopolistically competitive market with N firms. The following equations describe the demand, marginal revenue and cost for each firm.
A tariff on textiles is equivalent to a tax on consumers and a subsidy to the textile producers and workers. A tariff lowers the real income of the country, while at the same time it distributes income from the consumers to the governments and to the..
What is a call option for a stock? Suppose the current stock price is $40, and the strike (or exercise) price of the call option is $35. Is the stock option in the money or out of the money? What is the intrinsic value of this call option?
With current technology, suppose a firm is producing 800 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 5 units of land, 4 units of capital, and 1 unit of entrepre..
mission or vision and processes of the school/ISD?
Preparing for the final project: outlining your goals, Intentions, and approach -if you haven't done so recently, review the " preview of your Find Project" criteria sheet. for this assignment, provide an outline with your goals, intentions, and appr..
During the last decade, outsourcing often translated in offshoring of product buys. One popular location to buy product offshore was China. Why was China such a popular spot to buy labor intensive products? Why are many people leaving China and bring..
When the price of bananas is 50 cents a pound, the total demand is 100 pounds. If the price elasticity of demand for bananas is −2, what quantity would be demanded if the price rose to 55 cents a pound?
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 110 - 0.25P, and the marginal cost of production is $160. Determine the optimal number of units to put i..
Suppose that Congress imposes a tariff on imported autos to protect the U.S. auto industry from foreign competition. Assume that the United States is a price taker in the world auto market. The following graph shows the U.S. auto market, the world pr..
Mr. Roe gave up a job paying $18,000 and investments paying $6000 a year to pen this business. What is his accounting profit and what is his economic profit?
Show graphically about what happens to utility level and elucidate why the result is plausible.
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