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Consider two firms selling a differentiated product, with demand functions qi = 12pi +pj for all firm i = 1,2 and j does not equal i. Firm 2's (the entrants) marginal cost is 0. Firm 1's (incumbents) marginal cost is initially 1=2, but if the incumbent invests a fixed amount I = 0:205, it acquires a new technology that reduces its marginal cost to 0. (a) Consider the timing: The incumbent chooses whether to invest; then the entrant observes the incumbents investment decision; then the firms compete in prices. Show that in subgame perfect equilibrium (SPNE) the incumbent does not invest. (b) Show that if the investment decision is not observed by the entrant, the incumbents investing is part of the equilibrium. Comment. (c) Explain why the conclusion in question (a) may be affected if the entrant faces a fixed entry cost, F. Does it matter whether the potential entrant makes its entry decision before or after the incumbents investment decision? (Just give the argument; you do not need to compute anything.)
If a large-scale war resulted in massive destruction of physical facilities, but not loss of life
With the decrease in demand for bridge and tunnel crossings, what is the optimal way to adjust tolls: raise tolls, lower tolls, or leave unchanged.
Illustrate how much will they have accumulated principal plus interest when they reach 65 years old. What is the moral of this situation.
Show graphically the effect on the supply and demand for Bonds in a deflationary period.
which cumulative expenditures are increased. Raising taxes also government expenditure by the same amount such which cumulative provide is decreased also cumulative demand is increased.
If David and Ellen live in rent-controlled apartments, Illustrate what is the equilibrium cost for the non-rent-controlled apartments.
For each of the determinants of demand in Equation identify an example illustrating the effect on the demand for hybrid gasoline-electric vehicles.
Elucidate how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves.
How much have global trade and global production (gross national income) grown since World War II? What parts of the world economy have grown fastest in the last 20 years? (Be able to name some countries)
Explain how will the market restrain economic freedom. Explain how will society produce goods and services at lowest cost.
Illustrate what is now the effect on gold consumption also mining of an increased utilize of gold as money.
How can these leaders use their control over current taxes, subsidies and government debt to force their successors to reduce steady -state government expenditures below 900,000 goods.
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