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Consider Bertrand competition but with differentiated products. The products are Mishka’s coffee and Temple coffee. The demand for Mishka’s coffee is given by qM =12 − 2pM + pT where pM is the own price of coffee and pT is Temple’s price of coffee. Demand for Temple’s coffee is qT = 12 − 2pT + pM. Note that because the products are differentiated, if one coffee shop sets a lower price it does not capture the entire coffee market. Assume the marginal cost of each coffee shop is 3.
(a) Find the best response functions of each coffee shop.
(b) Solve for the equilibrium prices of each coffee shop.
Explain how the price-specie-flow mechanism operates to maintain balanced trade between countries. What are the assumptions that are critical to the mechanism's successful operation?
The production function : q = L. This function is widely used in economic research. Using the function, show the following. statement in mathematical proof:
Illustrate what is the marginal cost of the 1,000th packet. Is this firm making an economic profit, a normal profit, or an economic loss
Explain would your answer differ if you and your rival were required to resubmit price quotes year after year and if, in any given year, there was a 50 percent chance that Toyota would discontinue the Highlander.
"Angela view Apples and Bread as a perfect substitutes at a 1:1 ratio. Thus she will always spend half of her income on each good. Graphically illustrate, aided with verbal discussion, why isoquants cannot intersect.
The settlement requires KopyKat to pay the employee $10,000 per month for the next year. Determine the optimal price and output for the firm under these new conditions.
Bob borrows $52000 from a local bank at an APR of 7.2% compounded monthly. His monthly payments are $52000(A/P, 0.6%, 54) = $1128 for a 54 month loan. If Jim makes an extra payment on the first month of each year, his repayment duration for the loan ..
A couple operate a pet sitting service on the side. They want to add a daily service of a photo placed online for pet owners who are travelling. The required equipment is expected to cost $636 to purchase and $16 per month to operate. Revenues are ex..
Explain how much of input 2 does it use. B) What is the most that it is willing to bribe an inspector to allow it to use another unit of input 1.
Consider the decision of a household to have additional children. As a result of the substitution effect(s) of a wage increase, economic theory predicts that: In the household production model, the income effect associated with a wage decrease will:
For the next three questions we will consider Sante Bank, which has the following (partial) list of accounts on its balance sheet:
An investment pays $2,100 per year for the first 3 years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fa..
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