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Consider two firms, A and B, which simultaneously set prices in every period. Firm A has marginal cost of cA = 6, while firm B has marginal cost of cB = 10. Assume no fixed cost. Market demand in each period is given by
Q (p) = 100 - 2p
Which price would firm A charge if it was a monopolist? Firm B?
What are the Bertrand equilibrium price, output, and profits?
Suppose the two firms start to collude in the following way: They agreed to play a Grim Trigger Strategy and charge firm B’s monopoly price. Calculate the critical discount factor.
Suppose the two firms were symmetric, i.e. they had the same marginal cost, cA = cB = 10. Would collusion become easier or harder to sustain?
Suppose now that they compete in quantities in a Cournot duopoly when cA = cB = 10. Calculate the critical discount factor.
Submit answers to the following questions in the unit drop box. You must explain your answer and provide your supporting computations. Yes/No answers or simple numbers are not acceptable and will not receive full credit. Why does a sales tax shift a ..
An increase in the price of a good leads to. The consumption bundle that maximizes utility for a consumer is the bundle that. When the price of a good changes, ______ influence(s) the change in consumption. The ______ is the change in consumption cau..
Assume the economy is initially in equilibrium, and then firms expect future total factor productivity to decrease. Using the New Keynesian Model framework: Explain and show graphically the impacts of this event on the goods and money markets.
If we expect the current poor weather conditions to lead to a reduction in the future supply of cotton them:
Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge? What will be the approximate value of these exports in 1 year in U.S. dollars given that the firm..
Should the seniority rule be eliminated, what is MOST likely to gain greater influence over the process of selecting committee chairs.
Discuss problems of measuring productivity in actual work situations. How might productivity be measured for each of the following industries?
Mr. Odde Ball enjoys commodities x and y according to the utility function U(x,y) = √x^2 + y^2. Graph Mr. Ball’s indifference curve and its point of tangency with his budget constraint, given by pxX + pyY = I. What does the graph say about Mr. Ball’s..
Suppose a nation has a pegged exchange-rate system and you are the nation's chief central banker. Explain what policy actions you would take to maintain the exchange-rate regime under the following circumstances.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interes..
A current highway project is estimated to have an average of $1,000,000 in annual maintenance costs upon completion. What is the capitalized equivalent of the perpetual annual maintenance costs for an account earning 6% annual interest?
Describe the Heckscher-Ohlin model (also known as the factor endowment). How does it predict countries will emphasize their comparative advantage?
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