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Exercise 1: A monopolist manufacturer sells to a monopolist retailer. Suppose the final consumer demand for the good at the retailer level is P = 200 – 4Q and the costs for the manufacturer of producing the good are represented by TC = 40Q + 10. The wholesale price is the only cost of the retailer. Calculate the profit of the retailer and of the manufacturer. Exercise 2: A monopolist manufacturer sells to competitive retailers. The competitive retailers currently provide no services for the manufacturer’s good. Suppose the final consumer demand for the good at the retailer level is P = 100 – Q and the costs for the manufacturer of producing the good are represented by MC = AC = 20. Currently, the manufacturer sell the good to the retailer at w = 60. 1. Calculate the profit of the retailers and of the manufacturer The manufacturer wants to increase its profits and has the option to use a RPM. Therefore retailers would have to set a minimum price of 80 and continue to sell the good to the retailers at w = 60. The retailers must invest in publicity in order to attract customers. Demand increases to P = 150 – Q. 2. What would be the profit of the manufacturer in this case? Will he set the RPM? The CEO of the manufacturer has another idea to improve the profit. He can merge with retailers in order to control the good market. In order to have the increased demand he will have to pay $1000. 3. What will he choose? What is the maximal price that the manufacturer will be OK to pay for the merge? Exercise 3: You are the manager of the unique supermarket of the town. A local company wants you to sell its milk. But you have already many other milk in you supermarket. You estimate that you would be able to sell 500L/day of this milk at p = 2. You know that the marginal cost of the local company is 0.5$/L but the manager propose the milk at 1$/L (and will never accept to sell it for less). a. What will be your profit if you accept the deal? b. What kind of tariff can you propose to the local company in order to improve your profit? c. What is your maximal profit in this case?
A town of 200 individuals that drives SUVs. 200 on average burn a gallon of gas every 18 miles. At 15,000 miles of travel what is the impact of driving this vehicle? The town became environmentally conscious and switched to hybrid SUVs in order to ge..
The Federal Reserve Board is considerining changing its target inflation rate. However, they are concerned about the immediate effect on inflation. Find the sensitivity of equilibrium inflation to a change in the Fed's target inflation rate in the..
Illustrate what is the effect on equilibrium price and quantity in the market for oranges if a new orange picking machine is developed.
If you get this classmate as your partner on a series of projects throughout the year, rather than only once, Explain how might that change the outcome you predicted in part (b).
Which of the following is always true of monopolists? a. they charge the highest possible price b. they always earn high profits c. they do not have to worry about demand d. they charge a price higher than marginal cost
Assume that you are considering a 7-night vacation to Fort Walton Beach, Florida, in March. You estimate the total cost of the trip to Fort Walton Beach at $1,250, including discounted airfare. However, a resort at Myrtle Beach, South Carolina, is of..
The average avoidable cost for a fringe firm is AAC(q) = 20/q + 5q. The marginal cost function for a fringe firm is MC = 10q . There are 10 fringe firms. The marginal cost of the dominant firm is 2 and the demand function is Q = 100 - P. What is the ..
Consider a shrimp restaurant at Fisherman’s Wharf in San Fransisco. The chef at the restaurant chooses whether to use farm-raised or wild-caught shrimp to produce the main dish – shrimp balls. Suppose the rent for the restaurant is $2,500. What is th..
In a Cobb-Douglas production function with constant returns to scale, if the share of income that goes to labor is 42%, what does alpha equal? Enter your number in decimal form as opposed to percentage form, rounded to two decimal places - use only n..
Minimum-wage legislation is less likely to have adverse effects on employment when the:
NOTE: It is important that you follow this instruction to the letter. The purpose of the task is to know if you can define each concept by a clear and precise explanation. Imagine that you are going to explain each term to someone who knows nothin..
Choose your favorite company, and then review a press release made by that company (usually located on the company’s Web site). Include the link to the company’s press release within your primary post so that your fellow classmates can review it. Aft..
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