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Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $50. Describe what would happen to output and price in each of the following situations if the firms are at (i) Cournot equilibrium, (ii) collusive equilibrium, and (iii) Bertrand equilibrium.
a. Because Firm A must increase wages, its MC increases to $80.
b. The marginal cost of both firms increases.
c. The demand curve shifts to the right.
Is current U.S.Monetary Policy expansionary or restrictive?Do YOU think that current U.S. Fiscal and Monetary policies should be expansionary or contractionary? Briefly indicate why YOU think this way.
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You're the manager of monopoly. A typical consumer's inverse demand function for your firm's product is P=100-2Q and your cost function is C(Q)=20Q. Find out the optimal two part pricing strategy.
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A policy that results in a Pareto superior outcome will always satisfy the Kaldor-Hicks Criterion; however, it may not increase social welfare.
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