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Assume that marginal cost of supplying one more operating system to a computer is zero. PM=price charged. Cost of production per computer is equal to $1000 + PM. Assume that the downstream computer industry is perfectly competitive and aggregate demand is given by Q = 50,000,000 - 10,000P .
The marginal cost to a downstream firm of producing a computer is $500 + PM + PI where PM is the price paid to Microsoft for "Windows" and PI is the price paid to Intel for a microprocessor. Assume that Intel has a monopoly over the provision of microprocessors.
a. Suppose that Microsoft and Intel simultaneously and independently set the prices for Windows and Pentium chips, PM and PI . What are the are the Nash equilibrium prices that Microsoft and Intel set?
b. Suppose Microsoft and Intel agree to bundle microprocessors and Windows together for a price PMI. What bundle price maximizes Intel and Microsofts joint profits? Would consumers benefit from such an agreement?
Demand for flower bouquets in a suburban town is described by: QD = 50 - 5 P + 2 Y, where Q is quantity, P is price per unit, and Y is an index of consumer income. Similarly, supply is described by QS = 10 P - 5. a) If Y = 100, what is equilibrium..
The federal government is considering three sites for mineral extraction in the national wildlife preserve. The cash flow ($ million) associated with each site are given below Initial cost Annual cost Annual benefits Annual dis-benefits Site A 50 3 2..
Suppose that a monopolist is selling in two distinct markets each sheltered from the other, and the marginal revenue of each product is given below and the marginal cost of each is the same as indicated. How much of each good will the firm produce..
You are the manager of a monopoly, and your demand and cost functions are given by P = 200 - 2Q and C(Q) = 2000 + 3Qsquared, respectively. a. What price-quantity combination maximizes your firm's profits b. Calculate the maximum profits.
Suppose P=20-2Q is the market demand function for a local monopoly. The marginal cost is 2Q. The local monopoly tries to maximize its profits by equating MC= MR and charging a uniform price. What will be the equilibrium price and output
A diesel generator for electric power can be purchased by the remote community for $480,000 and used for 10 years, when its salvaged value is$50,000. Alternatively, it can be leased for $70,000 a year.(Remember the lease payments occur at the star..
Suppose a monopolist faces the following demand curve: P = 140 - 6Q. Marginal cost of production is constant and equal to $20, and there are no fixed costs. a) What is the monopolist's profit maximizing level of output
You have just applied for a credit card with the following term and condition: You are to pay 13.9% APR, compounded monthly.If your current balance is $3000 and you skip payments for 2 months, what would be the total balance in your credit card stat..
U(C,1-L)=4C2/3(1-L)1/3, where C is the amount of consumption and L is the number of hours worked. If the price for consumption is $9, the wage rate per hour is $6, initially the consumer had $162 and 24 hours as time endowment
A monopolist sells Product A and Product B. A unit of Product A costs 5 dollars to procure while a unit for Product B costs 10 dollars to procure. Let PA be the selling price of Product A and PB be the selling price of Product B.
An injection-molding machine can be purchased and installed for $90,000. It is in the seven-year GDS property class and is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of at ..
Toget started, the owner of Sound Devices spent $100,000 of his personal savings to pay for some of the capital equipment used in the business. In 2010, the owner of Sound Devices could have earned a 15 percent return by investing in stocks of oth..
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