QM = 140,000 -32,000P marker Quantity demanded. QF = 60,000+ 8,000P, where QM = market quantity demanded, and QF = the supply of the competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. a. Determine the price and output that would prevail in the market under the condition described above. Identify output for the dominant firm as well as the competitive fringe b. Assume that the market demand curve shifts rightward by 40,000 units. Show that dominant firm is indeed a price leader. What output (leader and follower) and market il after the change in demand?

QM = 140,000 -32,000P marker Quantity demanded. QF = 60,000+ 8,000P, where QM = market quantity demanded, and QF = the supply of the competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. a. Determine the price and output that would prevail in the market under the condition described above. Identify output for the dominant firm as well as the competitive fringe b. Assume that the market demand curve shifts rightward by 40,000 units. Show that dominant firm is indeed a price leader. What output (leader and follower) and market il after the change in demand?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.
4.5 Show that the long-run equilibrium number of firms is indeterminate when all firms in the industryshare the same constant returns-to-scale technology and face the same factor prices.4.7 Technology for producing q gives rise to the cost function c(q) = aq + bg. The market demand forqisp =a - Bq.(a) If a>0, if b < 0, and if there are J firms in the industry, what is the short-run equilibriummarket price and the output of a representative firm?b) Ifa> 0 and b <0, what is the long-run equilibrium market price and number of firms? Explain.() Ifa>0and b > 0, what is the long-un equilibrium market price and number of firms? Explain.
In a market with a single price-making firm with total costc(y) = 2y, the industry demand is givenbyQ= 100−2p. a) Find the inverse industry demand by solving forp, then graph the inverse industry demandwith price on they-axis. b) How do you expect the price of the good to be relative to its marginal cost?c) How do you expect the Lerner Index to be in relation to 0 and 1? Will it be 0? Will it be 1? d) Find the optimal supply and the equilibrium price in this market. Does the price match yourexpectations? e) Calculate the Lerner Index and mark-up in this market. Does this match your expectationsfor the Lerner Index?
16:04 Fri 7 May 16% O a Ims.gimpa.edu.gh Suppose that the demand functions facing a multi- product firm are as follows: Q, = 40 – 2P, + P2 Q, = 15 + P, - P2 1 The cost function of the firm is given by C = Q², + Q,Q, + Q²2 %D How much should the firm produce for each product, in order to maximize profits? How much profit is obtained? MAGEMENT AND
. (Requires calculus). In the model of a dominant firm, assume that the fringe supply curve is given by Q = -1 + 0.2P, where P is market price and Q is output. Demand is given by Q = 11 – P.What will price and output be if there is no dominant firm? Now assume that there is a dominant firm, whose marginal cost is constant at $6. Derive the residual demand curve that it faces and calculate its profit-maximizing output and price. highest bidder, but both the winning and losing bidders must pay her their bids. So if Jones bids $1 they pay a total of $3, but Jones gets the money, leaving him with a net gain of $98 and Smith with -$1. If both bid the same amount, the $100 is split evenly between them. Assume that each of them has only two $1 bills on hand, leaving three possible bids: $0, $1 or $2. Write out the payoff matrix for this game, and then find its Nash equilibrium.
2. You are the Southeastern Michigan regional manager at Coca-Cola, responsible forproduction and pricing in the Metro Detroit area. Your primary competitor is Pepsi. The marketresearch team at Coca-Cola is thinking about launching a new product, Orange Vanilla Coke, toboost the brand. The cost function to produce a 12-pack of 12 fl. oz. cans of Orange VanillaCoke is C(qcoke) = 0.25qcoke and the market research team has estimated inverse market demandfor a 12-pack of this new “pop” in Southeastern Michigan to be P = 10.25 – 0.00025Q. a. Assuming Pepsi decides not to produce a similar product, allowing Coca-Cola to maintainmonopoly power in the market for orange vanilla cola, what price and quantity will youchoose to maximize profit? How much profit does Coca-Cola earn?b. What price and quantity you would choose to maximize profit if Pepsi spies discover yourproduct before launch, allowing Pepsi to produce and launch an identical product at the sametime. For your answer, assume the cost…
Short-run supply and long-run equilibrium Consiber the competitive market for rhodium. Assume that no matter how many firms operate in the induatry, every firm is identical and faces the same marpinal cost (MC), averapt total cost (ATC), and average variable cost (AVC ) curves plotted in the following praph. The following graph plots the market demand curve for thodium. If there were 10 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhodium market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True False
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to$50 and a fixed cost of $22,500. You are asked to advise the CEO as to what prices andquantities BMW should set for sales in Europe and in the United States to maximize its profits.The demand for BMWs in each market is given by:QE = 8,000 – 80PE and QU = 4,000 – 20 PU,where the subscript E denotes Europe, the subscript U denotes the United States. Assume thatBMW can restrict U.S. sales to authorized BMW dealers only. Support your answersgraphically as well.a. If, by an international agreement between Europe and United States, BMW wereforced to charge the same price in each market, what would be the quantity sold in eachmarket, the equilibrium price, and the company’s profit?b. Suppose now that Europe and United States signed a new trade package under whichBMW now can charge different prices across the two markets. What quantity of BMWsshould the firm sell in each market, and what should the price be…
3. Assume that the manufacturing of generic medicine XYZ is a perfectly competitive industry. Suppose that the annual demand for this medicine is given by: QD = 1,450 - 30P. There are exactly a hundred manufacturers in the market. Each manufacturer has the same production costs. These are described by 5 total and marginal cost functions of: C(q) = q² + 25q + 2.5 and MC(q) = 5q + 25. a. Show that an individual firm in this industry maximizes profit by producing: q = -5 +0.2P. b. Derive the industry supply curve and show that it is: QS = -500 + 20P. c. Find the market price and aggregate quantity traded at the equilibrium price. d. How much output does each firm produce? e. f. Calculate each firm's profit. Using market demand and supply functions (QD, QS): i. Graphically represent the equilibrium in the market; ii. Calculate producer surplus; and iii. Consumer surplus in this competitive equilibrium. Li 11. total cost and demand of an individual firm in
Suppose that the industry demand curve is given by the following quantity demanded = 100 – 0.5 output. In equilibrium, the market price is equal to 6 pesos per unit. q TR MR TFC TVC TC AC AVC AFC MC Profits 0 10 1 5 2 3 3 2 4 1 5 2 6 3 7 4 8 5 9 6 10 7 11 8 Identify the price at which the firm breaks -even. Explain. Identify the price at which the frim shuts-down. Explain.
The Android phone market is highly competitive since there is a large number ofcompanies and potential entrants. For simplicity, assume each firm has an identical coststructure, and the cost does not change with new firms’ entry. Each firm’s long-run average costis minimized at 300 and the minimum average cost is $150 per unit. Total market demand isgiven byQ = 15,000 − 50P.a. What is the Android phone market’s long-run supply curve? b. What is the long-run equilibrium price (P∗) and total industry output (Q∗)? Howmany companies are competing in this market?c. The short-run total cost curve for each firm is given by STC = 0.5q^2 − 150q +20000, where q is the firm’s production quantity. Find the short-run marginal cost(SMC) for each firm. What is the market short-run supply curve?d. Suppose Android phone has become more popular and the market demandcurve shifts outward to Q = 20,000 − 50P. In the *short-run*, find the new equilibriumprice. What is the new equilibrium price in…
The information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract. Quantity 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 Price 60 55 50 45 40 35 30 25 b. Refer to Table 17-36. Suppose these 2 firms are price competing with each other (as what happens in a perfectly competitive market). What would total output be? a. 0 21250 1200