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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.
What is the probability that more than 200 cars will require service work in a particular month? B. What is the probability that fewer than 175 cars will need service work in a given month?
Refer to the following table which gives the demand and cost data for a price-setting firm: What is the maximum amount of profit that this firm can earn? What is the profit-maximizing price?
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Suppose the real side of an economy is characterized by: Y = 80K1/2 L1/2 K=100 and L= 100 G = 3000 T = 3000
For a “normal” good, the income and substitution effects are not opposing forces. That is, for a “normal” good, the substitution and income effects of an increase in the price will both cause a reduction in the quantity purchased. Assuming both types..
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Figure 4-6 shows that a payroll tax will be completely shifted to workers when the labor supply curve is perfectly inelastic. In this case, for example, a new $2 payroll tax will lower the wage by $2, will not affect employment, and will not result i..
illustrate what will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources.
Discuss whether each statement is an example of positive economics or normative economics or if it contains elements of both: an increase in the personal income tax will slow the growth rate of the economy.
What is cost-minimizing firm's expansion path will have vertical or horizontal segements.
Firms are competing in the DVD rental market, they have a symmetric inverse demand P=310-Q (N-firm model). Marginal cost for each is $30. What quantity does each firm produce? What profit does each firm receive?
q.1. the initial tax basis may includea. legal fees.b. commissions.c. second mortgage note signed by purchaser.d. all
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