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Go back to the model with firm performance differences in a single integrated market (pages 172-175). Now assume that a new technology becomes available. Any firm can adopt the new technology, but its use requires an additional fixed-cost investment. The benefit of the new technology is that it reduces a firm's marginal cost of production by a given amount.
a. Could it be profit maximizing for some firms to adopt the new technology but not profit maximizing for other firms to adopt that same technology? Which firms would choose to adopt the new technology? How would they be different from the firms that choose not to adopt it?
b. Now assume that there are also trade costs. In the new equilibrium with both trade costs and technology adoption, firms decide whether to export and also whether to adopt the new technology. Would exporting firms be more or less likely to adopt the new technology relative to non-exporters? Why?
Suppose the inverse market demand is given by P = 20 - Q. If the incumbent produces 8 units of output, which of the following equations best summarizes the potential entrant's residual demand curve P = 12 - 8Q P = 20 - 12Q P =20 - 8 Q P = 12 - Q
Aid to Families with Dependent Children (AFDC) was established with the Social Security Act of 1935. The family was given an income subsidy depending on family size. Under this program, the family's benefit was reduced by $1 for every dollar earne..
Which of the four properties outlines in Section 6.3 would such indifference curves violate?
Calculate the equilibrium price and quantitiy in the chocolate market. How much does a firm of each type produce Calculate the consumer and producer surplus What is the producer surplus for an individual firm of each type
Whenever John is singing, the sales revenue from concert tickets is $100,000 higher than if a regular singer is singing. If he doesn't become a singer, he can get a job that pays $50,000 at most. How much will he be paid in equilibrium How much of..
A French company merges with an American company; stockholders in the U.S. company exchange their stock for shares in the French firm.
An insurance company wants to estimate the mean score on this exam for students who have enrolled in a special study program. They take a sample of 8 students in this program and determine that their scores are: 2, 5, 8, 8, 7, 6, 5, and 7. This sa..
a. If the Fed requires banks to hold 5 percent of deposits as reserves, how much in excess of reserves does First National now hold b. Assume that all other banks only the required amount, by how much would the economy's money supply increase
Government purchases and taxes are Php 600 and Php 400, respectively in millions. Investment equals Php 500 million. The autonomous part of consumption is Php 800 million. With marginal propensity to save at 0.20, what is equilibrium output
The licensing restrictions allow each company to sell as much as it wants at a price ceiling of $2,200. You have the following output and MC data for each company: Output MC ($) Q Abba Babba Cabba 1,000 2,500 2,600 2,700 2,000 2,400 2,300 2,500 3,..
Similarly, calculate the F statistic from the value of R2 obtained in the earnings function fitted using your EAEF data set and check that it is equal to the value printed in the output. Perform an appropriate F test.
Demand estimation for brand-name consumer products is made difficult by the fact that managers must rely on proprietary data. There is simply not enough publicly available data, which can be used to estimate demand elasticity for brand-name produc..
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