7. find the amount of firms which exist in the industry for M = 2,4,6,8 Use a cournot model with linear demand and identical firms scaled by M Q(P) = M(D-P) TC(Q) = cQ+F D=6 c=2 F=2
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- A6 In Changlun, Kedah, there are two bakers, Abu and Bakar. Their bread taste the same and nobody can tell the difference. Abu has constant marginal costs of RM1 per loaf of bread. Bakar has constant marginal costs of RM2 per loaf. Fixed costs are zero for both of them. The inverse demand function for bread in Changlun is p(q) = 6 – 0.01(qA + qB), where q is the total number of loaves sold per day. Find the reaction function for Abu and Bakar. What is the Cournot Nash equilibrium number of loaves of bread for each baker?5. N - Σ Consider a Cournot model in which N firms compete with each other by setting quantities. The market inverse demand function is P = a i=1 qi, where a > 0 and q; is the quantity of firm i. Firm i's cost function is quadratic: q, where c₂ > 0. (a) Suppose N 2. Find the Nash equilibrium. Show which firm produces more in the equilibrium and explain your result. (b) = Suppose N≥ 2 and ci = c for all i. Find the Nash equilibrium. Show whether the firms produce more or less than the constant marginal cost case where the cost function is cqi, with a>c>0.15.9 (0) The demand function for football tickets for a typical game at a large midwestern university is D(p) = 200, 000 – 10, 000p. The university has a clever and avaricious athletic director who sets his ticket prices so as to maximize revenue. The university's football stadium holds 100,000 spectators. (a) Write down the inverse demand function.. (b) Write expressions for total revenue and mar- ginal revenue as a function of the number of tickets sold. (c) On the graph below, use blue ink to draw the inverse demand function and use red ink to draw the marginal revenue function. On your graph, also draw a vertical blue line representing the capacity of the stadium. Price 30 25 20 15 10 20 40 60 80 100 120 140 160 Quantity x 1,000 (d) What price will generate the maximum revenue? What quantity will be sold at this price?. (e) At this quantity, what is marginal revenue?. At this quantity, what is the price elasticity of demand?. Will the stadium be full?
- The petrol industry in Dubai has become increasingly concentrated in recent decades. The number of firms in the industry has dropped by 40 per cent since 1999 peak, while the remaining firms "swelled in size." In order to enter the industry , the owners of the companies must have significant capital at their disposal and they consider the impact of their decisions on competitors and the reaction of their competitors on themselves. Older firms tend to rest on their laurels, having little incentivw to innovate. They spend less on research and development, and instead acquire growth through mergers or acquisitions and expand margins by raising prices on consumers. As at 2020, Cyril Tech has become the largest player in the market providing 80 per cent of the petrol output. The remaining players control 20 per cent of the output. A. State what market structure existed in the petrol industry SUBSEQUENT to 1999. Can excess profit be earned in this industry in the long run. Explain B. State…5. Foreign direct investment versus licensing Giocattolo is a profit-maximizing firm producing toy cars-a capital-intensive good-which are sold in its home country, Italy, and abroad in Spain. Giocattolo chose foreign production as a method of penetrating the Spanish market and has to decide whether it is more efficient to directly invest in Spain to establish a production subsidiary or to license the technology to a Spanish firm to produce its goods. On the following graph, AVC Spain is the average variable cost curve of a Spanish firm producing toy cars. (This curve represents costs such as labor and materials.) The curve ATC subsidiary represents the total unit costs Giocattolo will face if it establishes a subsidiary in Spain. PER-UNIT COST (Dollars) 10 9 8 2 1 0 0 15 ATC Subsidiary + 105 30 45 60 75 90 PRODUCT (Thousands) 120 AVC Spain + 135 150 ?Economics A textbook publisher finds himself in monopolistic competition. This company cannot sell books at a price of $ 100 pesos per book. But for each decrease of $ 10 pesos that he makes in the price, the number of books he manages to sell increases by 20 daily books. The fixed cost of the company is $ 2,400 pesos per day. The average variable cost and the marginal cost of the company is constant at $ 20 pesos per book. If the business spends $ 1,200 a day on advertising, it can increase the number of books sold at each price by 50%. What is the price that maximizes the profits of the company when advertising is used? $ 60 $ 70 $ 50 $ 40
- per pair You are the CEO of a company that advises clients on pricing strategies. Bilbo Baggins is a profit maximizing client who produces uniquely styled shoes and hires you for pricing advice. The graph shows the demand and marginal revenue (MR) curves faced by Bilbo's company for two different groups of consumers. Assume Bilbo can prevent the reselling of his shoes, faces constant marginal cost (MC) equal to $20/pair, can identify varying consumer groups, and has no fixed costs (so, MC ATC). Use the graph to answer the questions. = Price $100 90 80 70 60 50 40 B What price should Bilbo charge? He should charge the more elastic group $60/pair and the less elastic group $70/pair. 30 30 20 10 10 MR 2 Demand 2 He should shutdown in the short run because price is not greater than fixed costs. 0 100 200 300 40C He should price discriminate and produce where P = MC and charge $20/pair. He should produce where MR = MC and charge $70/pair.Question-4 (Duopoly) There are two firms in the pumpkin industry: C and S. The demand function for pumpkins is q = 3, 2001, 600p. The total number of pumpkins sold at the market is q =qc+qs, where qc is the number that C firm sells and qs is the number that S firm sells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how many pumpkins they produces. 1. Every spring, each of the firms decides how many pumpkins to grow. They both know the local demand function and they each know how many pumpkins were sold by the other firm last year. In fact, each firm assumes that the other firm will sell the same number this year as its sold last year. So, for example, if firm S sold 100 pumpkins last year, firm C believes that firm S will sell 100 pumpkins again this year. If firm S sold 100 pumpkins last year, what does firm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year? 2. Suppose that in year 1, firm C produced 200 pumpkins and firm S…an Problem 5. Consider following price competition between 2 firms. Both firms choose their prices (p, and p2) simultaneously and the market demand function given by q 10-min{p₁, P2}. Assume production costs are 0 for both firms. Thus, the payoff (profit) function for firm i is: u.(Pi. Pj) (10-P.)Pi (10-pi)Pi 2 Notice that this function is not continuous in pi 1 if Pi Pj
- Qno3 AVAC is the only pharmaceutical firm producing a Vaccine. The Demand Curve for its product is Qd = 250 – 50 P where P is Price and Q are packs of vaccines in ‘000 Total Cost Function estimated by the firm is TC = 15 + 0.5Q where Q is monthly output. Required. a). What is the market structure of AVAC? State its characteristics. b). To maximize profit, i) What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month? ii). If this number of packs is produced and sold, what will be the firm’s monthly profit? c). Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph.? d). Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will…1. An industry consists of three firms with identical cost functions, C(q.) = 18q; + q?, where i = 1,2, 3. Market demand is given by Q = 150 – P, where Q = E1q; is total industry quantity. (a) Are there fixed costs? Constant marginal costs? Economies of scale? (b) Solve for the Cournot Nash equilibrium quantities, price, and profits.Consider the model of Bertrand competition with linear demand Q(p) = max[0, a – p) and with two- %3D firms, in which demand is split if the same price is set. Suppose linear demand with a = 8, and constant cost c = 3 per unit, suppose Firm 1 chooses price pi = 7 and firm 2 chooses price p2 = 6. Which of these prices p would be a profitable deviation from pi for Firm 1? 02 3 06 07 Suppose now a = 16, and constant cost c = 8 per unit, if p2 = 14, what is the best-response for Firm 1? 14