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1.Patents and the Incentive to Invent
Suppose that, in order to invent a new product, a firm has to spend $120 onresearch and development. If the firm invents the product the government will grant it a patent for t years, but after t years enough firms will enter the market so that each firm earns zero profits in the long-run.
If the firm's annual costs are: C(Q)=Q^2+3Q+2
And the annual demand for the product is: QD =15-1/2pWhat would t have to be for the firm to be willing to invent the product?
2.Marginal Revenue of a Monopolista. Prove mathematically that marginal revenue is always less than price, P(Q).b. Explain this intuitively as well.You may use a graph to help you. Remember marginal revenue is the money the firm takes in after selling an additional unit
Derive the rm's marginal product of labor curve. Derive the rm's average product of labor curve. If the rm has an output quota of 5,120 widgets, how many laborers must it employ in the short-run to achieve this level of production?
Suppose that due to a political conflict inside the country, there is a risk the government will default in its debt in t = 2. The investors perceive the probability of that default to be = 0:10. What interest will they demand (HINT: because inves..
The industry demand function for bulk plastics is represented by the following equation: P=800-20Q Where Q represents millions of pounds of plastic. The total cost function for the industry, exclusive of a required return on invested capital, is TC=3..
A student is taking two courses, history & math. The probability the student will pass in the history course is .60 and math is .70. The probability of passing both is .50.
Calculate the total effect on welfare of a tariff of 5 per unit levied on imports. Calculate the total effect of a production subsidy of 5 per unit. Why does the production subsidy produce a greater gain in welfare than the tariff? What would the opt..
Consider a Stackelberg duopoly game of quantity competition. Firm #1 is the "Leader" and firm #2 is the "Follower." Market demand is given by the inverse demand function p=1000-4Q.where Q=q1+q2 is the total output of the two firms.
Now assume that intermediaries come from a competitive market with and equilibrium price of $8 per unit for their services, that is, any buyer or seller who wants an intermediary's services must pay $8 for them. What is the maximum per unit that s..
These bonds make annual payments and mature 8 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 14 percent. If the inflation rate was 3.3 percent over the past year, your total real return on thi..
Now suppose that there is a second ?rm with cost function c1 (q) above. Whichever cost function ?rm 1 chooses, the second ?rm will observe this choice and then have the option of entering the market or not. If he does not enter, ?rm 1 remains a mo..
Consider the following situation in the Country A's labor market: If the wage is w = $7:00, workers will provide l = 10 units of labor. If the w = $3:00, workers will provide l = 2. On the other hand, if w = $5:00, rms will want l = 6, and if w = $8:..
What is the cost of producing q output in the short-run? d. What is the marginal cost of producing a 301s unit? A 401st unit? If you are comfortable doing so, you may answer this question by writing down the marginal cost function directly, rather..
What amount would you need to invest today in order to set asside sufficient funds now to meet the future obligations Assume your money could earn 5.0% per year in low risk securities in the 7 year period in question.
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