5. Firms 1 and 2 compete on quantity with some product differentiation. They each have zero cost of production (zero marginal cost, zero fixed cost), but firm 1 may advertise and incur related costs. Demand for firm 1 is P1 = 10 – 91 - 92 + A, where q, and q, are quantities for firms 1 and 2, and A is firm l's level of advertising. The cost of advertising is A?. Firm 2 does not advertise. Demand for firm 2 is P2 = 10 – 41 - 92- First we consider the static game where all actions are simultaneous; thus, player l's strategy is s, = {41,A}, and player 2's strategy is s, = 42. a. Find firm 2's best response to some belief in s,. %3D b. Find the Nash Equilil ium quantities {a. a and advertising level A in the static
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- You own Athleticon, which manufactures athletic wear. Your new contract with Atlanta United, a professional soccer team, allows Athleticon to be the sole suppler of athletic wear with the “Atlanta United” logo. No one lese can manufacture athletic wear with the “Atlanta United” logo. What do you think will be Athleticon’s level of profitability on the sale of “Atlanta United” athletic wear? Explain why. Your contract with Atlanta United only lasts 3 years. It was not renewed. Other firms can now manufacture athletic wear with the “Atlanta United” logo It is now 5 years after your contract with Atlanta United was terminated. Any manufacturer that wants to can manufacture and sell athletic wear with the “Atlanta United” logo. What do you think will be the level of profitability and rate of return on manufacturing athletic wear with the “Atlanta United” logo? Explain why.3. Suppose Microsoft is selling the two products to the individuals below with their willingness to pay for each item as in the table. Suppose the costs of producing each item is $10 for both products. Find the maximum profit of Microsoft if it can sell with either unit pricing, pure or mixed bundle prices for these items. TIT Word Processor Spreadsheet Alice 20 10 Ben 40 30 Chris 80 70 Daniel 60 50Pricing Strategies for Firms with Market Power-End of Chapter Problem Elario's inverse demand for cupcakes is And Elario's marginal and average cost is a constant $0.50. Suppose Elario decides to sell cupcakes only in packages of 20. a. How much would customers be willing to pay to obtain a 20-pack of Elario's cupcakes? Price for 20-pack = $ b. How much profit will Elario earn from each customer? Profit per customer: $ c. Profit under this scheme is profit earned by Elario in part d of problem 16.
- PRICE (Dollars per engine) 100 90 80 70 60 40 30 & 2 20 10 MO D 0 10 ATC MR Demand 20 30 40 50 60 70 DO 90 QUANTITY (Thousands of engines) 100 Mon Comp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, a monopolistically competitive firm's average total cost in long-run equilibrium is average total cost. at the the minimum2. Suppose that the market demand for mountain spring water is given as follows: P = 1,200 - QMountain spring water can be produced at no cost. a. What is the profit maximizing level of output and price of a monopolist? b. What level of output would be produced by each firm in a Cournot duopoly in the long run? What will the price be? c. What will be the level of output and price in the long run if this industry were perfectly competitive?Refer to Figure 1. If the market price is $2, what the firm will do? Enable Editing 4) Use the figure below to answer the following questions. Price and cost (dollars per unit) 80 MC 60 40 ATC 20 MR 20 40 60 80 100 Quantity (units per week) Figure 2 a) Refer to Figure 2 If this firm is in monopolistic competition, what is its output? b) Refer to Figure 2 If this firm is in monopolistic competition, what is the price it will charge? c) Refer to Figure 2. What is the firm profit situation? What time frame equilibrium is the firm? d) Refer to Figure 2. If this firm in monopolistic competition is in short-run equilibrium, and the firm making profit what will happen in the long run to the firm profit? explain
- Assuming you are the managing director of a firm that produces three goods: A, Band C. The price elasticity of demand for A is 1.2, for B it is 1.00 and for C it is 0.75.It is known that he firm is experiencing serious cash flow problems and you have toincrease total revenue as soon as possible. If you were in a position to set the pricesfor these goods, what would be your pricing strategy for each product2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…You're the manager of a firm that has constant marginal cost of $6. Fixed cost is zero. The market structure is monopolistically competitive. You're faced with the following demand curve: $12 10 Price 8 6 4 2 0 3 Demand 100 200 300 400 500 600 Quantity Show Transcribed Text a. Determine graphically the profit-maximizing price and output for your firm in the short run. Demonstrate what profit or loss you'll be making. (Please draw a graph) b. What happens in the long run?
- 2. Consider an industry with two firms 1 and 2, each having marginal cost equal to zero. The industry demand is P(Y) = 60 – Y, where Y = y, + y2 is total output. a. What are the competitive equilibrium output and price of the market? b. Draw the demand schedule given output equals to 0, 10, 20, 30, 40, 50, 60, and indicate the corresponding profits. What are the monopolistic output and price if there is only one firm? If there are two firms who collude with each other to decide their quantities, what are the output quantities of two firms? c. If the two firms decide their quantities independently and simultaneously, use game theory to show if they have incentive to increase their quantities by 5 units than the above level. If so, do they have incentive to increase their quantities by 5 units further?In the long run, which of the following market has the following equilibrium condition: (1) everyone is making zero economic profit; (2) market price = ATC monopolistic competition monopoly O perfect competition oligopoly « Previous Nex No new data to save. Last checked at 11:47am Submit 000 80 DD esc F1 F2 F3 F4 F5 F6 F7 F8 F95- 3- 1- 20 40 60 80 100 Q MR Using the above graph, This profit-maximizing firm will produce Blank 1 units. -MC What price will this profit-maximizing firm charge? $Blank 2 (Do NOT enter the '$' in your response. Enter only the whole dollar amount; do NOT enter cents.) If the industry was perfectly competitive instead of monopolistic, then market output would be Blank 3 units and market price would be $Blank 4. (Do NOT enter the '$' in your response. Enter only the whole dollar amount; do NOT enter cents.) Blank 1 Blank 2 Blank 3 Blank 4 Add your answer Add your answer Add your answer Add your answer