Reference no: EM131236996
Consumers are uniformly distributed along a linear city of length 1 (assume, for simplicity, U[0, 1]), have transportation costs t per unit of distance, and have unit demands. Except for their location, they are identical and have surplus s for the good sold by the monopolist. The monopolist is considering establishing shops at the borders of the city or in the center (at location 0, 1, or 1/2). The monopolist may set up 1, 2, or 3 shops with the cost of each shop being fixed f. There is no marginal cost of production.
a. Show that the monopolist will always open a shop at location 1/2 if it opens any shops.
b. Derive the profits the monopolist will earn if it opens 1 or 3 shops (there are multiple cases for each number of shops demarcated by the relationship between s and t and whether the market is covered.)
c. Explain whether the monopolist should open 1 shop or 3 shops. In other words, what are the conditions on s, t, and f for the monopolist to choose 1 shop as compared to 3?
Use hotelling model for horizontal differentiation
|
Make future supply adjustments to fix oil prices
: The secretary general of OPEC, Ali Rodriquez, stated that it would be easier for OPEC nations to make future supply adjustments to fix oil prices that are too high, than it would be to rescue prices that are too low. Evaluate this statement.
|
|
Old marketing ploy called intentional scarcity
: Was the severe shortage for over two years an old marketing ploy called intentional scarcity, in which a company purposely keeps its hot product in short supply to build buzz. Or was it simply bad planning on Nintendo's part?
|
|
For-profit pharmaceutical corporations face in the future
: According to your text, which of these is a major challenge that for-profit pharmaceutical corporations face in the future? A big problem a large portion of nursing home staff face is: The pharmaceutical industry is a complex system, with biomedical ..
|
|
Why are markets considered to be superior to monopolies
: Economists generally believe, and teach their students, that competitive markets (in the sense that we use the term technically) are the best. Why is this the case and why are these markets considered to be superior to monopolies, provide an example ..
|
|
Identical and have surplus for good sold by the monopolist
: Consumers are uniformly distributed along a linear city of length 1 (assume, for simplicity, U[0, 1]), have transportation costs t per unit of distance, and have unit demands. Except for their location, they are identical and have surplus s for the g..
|
|
Obtain the range of income levels for individuals
: In the country of Bolivia, bread costs 3bs (bolivianos) per loaf and milk costs 4bs per gallon.The government has decided to attack poverty by guaranteeing 8 loafs of bread and 3 gallons of milk per person per week. Only individuals that cannot affor..
|
|
Indifference curve equals the ratio of marginal utilities
: Show (provide the derivation and explain) why the slope of the indifference curve equals the ratio of marginal utilities. Then show graphically and explain why the optimal consumption point is where the ratio of prices equals the slope of the indiffe..
|
|
If the price elasticity of demand for used cars priced
: If the price elasticity of demand for used cars priced between $4,000 and $6,000 is -1.2 (using the mid-point method), what will be the percent change in quantity demanded when the price of a used car falls from $6,000 to $4,000?
|
|
Many mental diseases have biological roots
: What is a consequence of recognition that many mental diseases have biological roots? Mental health problems are often intertwined with other social problems, such as alcohol and drug abuse. Which of the following diseases has substantially increased..
|