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Consider a Cournot model in which prior to merger there is one low cost firm with marginal cost equal to 12 and 2 high cost firms with marginal cost equal to 24. Fixed costs are zero and inverted market demand is given by P = 48 – Q. In the post-merger setting the low cost firm merges with one of the high cost firms. The merged firm has marginal cost equal to 12 (i.e. equal to the marginal cost of the low cost firm). Outsider marginal cost remains at 24.
a) Solve for the pre-merger level of (i) output and profit for each firm (ii) Herfindahl index and (iii) Welfare.
b) Solve for the post-merger level of (i) output and profit for each firm (ii) Herfindahl index and (iii) Welfare assuming that the merged firm acts like a Cournot firm. Is the merger profitable for the insiders? Does it raise welfare? Does it increase concentration?
c) Repeat b) except assume that the merged firm acts like a Stackelberg leader and the non-merged firms act like Stackelberg followers.
World Trade Center and Pentagon affected short and/or long-term productivity in United States. Elucidate your response and show any movements in PPF.
determine the probability that buying the equipment will produce a return less than that of the bank and the probability that buying the equipment will produce a return more than that of the bank.
Distinguish between explicit and implicit costs, giving examples of each. What are the explicit and implicit costs of attending college? Why does the economist classify normal profit as a cost? Is economic profit a cost of production?
Constrained Optimization in Economics 2. Minimize costs for a firm with a cost function Subject to the production quota
A tax rebate by the government would:
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Use this information to predict the annual number of VCRs sold if increasing competition from Asia causes VCR prices to fall by 10% with income and the price of DVDs is unchanged. 4.35 million 5.65 million 5.85 million 4.58 millio..
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Maria's Performance Pizza is a small restaurant in Miami that sells gluten-free pizzas. Maria's very tiny kitchen has barely enough room for the four ovens in which her workers bake the pizzas. Maria signed a lease obligating her to pay the rent for ..
An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 80 minutes and an ounce of coffee in 120 minutes. Draw fully labeled ..
q.there are two countries- home and foreign. suppose that the production of vacuum cleaners exhibits external economies
Assume that an economy is characterized by the following equations: C = 100 + (2/3)(Y – T) T = 600 G = 500 I = 800 – (50/3)r Ms/P = Md/P = 0.5Y – 50r. Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, an..
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