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Suppose Apple sells phones with 4-inch screens and Samsung sells those 5-inch ones. Consumers have their hands of different sizes. Their most preferred sizes, as a result (that might depend on the probability that they drop their phones), are distributed uniformly on [4, 5] inches. The preferred smart phone will give each consumer a benefit v when consuming it. Suppose for each unit of difference between their consumed size and their preferred screen sizes, the consumer will be disutilized by t. Suppose Apple and Samsung are charging prices Pa, Ps, respectively. The marginal cost for producing a phone is c for both the firms.
a) Please write down the utility for a consumer with preferred size, when he/she is consuming the 4-inch iphone. Also please write down the utility when he/she is consuming the 5-inch galaxy.
b) What is the theta for the consumer indifferent between iphone and galaxy?
c) Given Pa,Ps, what are the demand functions for Apple and Samsung? d) What are the equilibrium prices for iphone and Samsung?
e) Now suppose v = 700, t = 400, what is the price in the market?
Define absolute and comparative advantage in your own words. Elucidate how absolute and comparative advantages were used in your simulation.
illustrate what feature of the value function explains the phenomenon, and how.
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Depends on the evidence in this article and what you know about the economy in the United States, decide which of these statements is most likely to be true.
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