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Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Assume that the demand curve for the industry is given by P = 100- Q and that each firm expects the other to behave as a Cournot competitor.
a. Calculate the Cournot-Nash equilibrium for each firm, assuming that each chooses the output level that maximizes its profits when taking its rival"s output as given. What are the profits of each firm?
b. What would be the equilibrium quantity if Texas Air had constant marginal and average costs of $25 and American had constant marginal and average costs of $40?
c. Assuming that both firms have the original cost function, C(q) = 40q, how much should Texas Air be willing to invest to lower its marginal cost from 40 to 25, assuming that American will not follow suit? How much should American be willing to spend to reduce its marginal cost to 25, assuming that Texas Air will have marginal costs of 25 regardless of American"s actions?
An investment opportunity will pay $10 with a 20% probability, $20 with a 40% probability, $30 with a 30% probability, and $40 with a 10% probability. what is the standard deviation of the investment?
Consider two ways to protect your car from theft. The Club(a steering wheel lock) makes it difficult for a car theif to take your car. Lojack(a tracking system) makes it easier for the police to catch the car thief who has stolen it.
At what output is AVC at minimum? If the market price of firm's output is $7 per unit, should the firm produce or shut down?
Assume that a union's target is to maximize total wage income received by union workers, namely, the average union wage times the number of union workers employed.
Do you have to conduct a SWOTT Analysis to have an effectivestrategic plan What are the primary internal organization considerations for the development of a strategicplan Which consideration is the most important
The government make a decision to finance the increased expenditures need to close the GDP gap, by rising taxes. Determine the necessary changes in government spending and taxes to close the GDP gap?
Go to the internet auction site eBay at www.ebay.com and pick the category Jewelry and Watches, followed by Loose Diamonds and Gemstones, and then Diamonds, Natural.
An economy is faced by exhaustion of an important natural resource at a time when it is introducing improved technology.explain how these events will effect the economy production possibility curve.
In your own words, describe the law of demand through the income and substitution effects, using a price increase as a point of departure for your discussion.
For Karr Company, the predetermined overhead rate is 140% of direct labor cost. During the month, Karr incurred $90,000 of factory labor costs, of which $80,000 is direct labor and $10,000 is indirect labor. Actual overhead incurred was $119,000.
Suppose that the rate of depreciation as well as the rate of saving are each .10. Also assume that there is no technological nor population growth.
Miller Manufacturing has a target debt ratio of 70% (that means weight of debt is 70%). Its cost of equity is 18%, and its cost of debt is 10%. If the tax rate is 35%, what is Miller's WACC?
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