(a) Suppose there is a single firm with inverse supply function p(q) = q. Find the competitive equilibrium. (b) Find the elasticity of demand and supply at the equilibrium. (c) Suppose instead that there are three firms with the identical inverse sup- ply funetion given in part (a). Find the competitive equilibrium.
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- 6. Suppose the market demand for a homogeneous product is given by P = a-bQ, where a and b are positive constants. There are n identical firms, each of which is capable of producing the product at constant marginal cost c > 0. Assume c1. It is 1908 and you are the CEO of Ford Motor Company. General Motors startedproducing cars this year and has quickly become your chief rival. Their recent entrance, as wellas your assembly line methods, allows you the advantage of producing cars faster and choosingyour output levels first. Assume the 1908 inverse demand function for cars is P = 3900 - Q(customers view cars as identical products at this point in time) and production costs are C(qi) =100qi. a. What is Ford’s profit-maximizing output level? GM's?b. What is the market equilibrium price?c. How much profit does each firm earn?d. As the assembly line is used by other firms, the first-mover advantage disappears (fast forward100 years to present day), and more firms have entered the market (e.g. FCA, Tesla, Hyundai,Toyota, Honda, etc.), what do you expect to happen to Ford’s profit (assume demand andcosts are the same)? Explain.e. From 1908 into the 1920s, Ford offered customers one car: the Model T. Further, Henry isfamous…1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0.(a) Solve for equilibrium price and quantity assuming this is a monopoly market. (i.e. Sup-posing there is only one firm, with no threat of entry, find the choice of quantity thatmaximizes profit, and then compute the corresponding market price.)(b) At this price and quantity, what is the monopolist’s profit?(c) What is consumer surplus?(d) What would be the perfectly competitive price, quantity, and consumer surplus?(e) How much is deadweight loss due to monopoly?250 225 Revenue Lost 200 175 150 Revenue Gained 125 Demand 100 75 50 25 3 4 7 8 9. 10 QUANTITY (Fire engines) Gilberto increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. O True O False acer Σ 2. 1. PRICE (Thousands of dollars per fire engine)WEBCAM RECORDING Industrial Economics da 6 A market is characterised by an inverse demand curve p =8 – 2Q where Q is total quantity. Two firms, A and B, are competing à la Cournot and TCA(qA) = 29A and TCB(qB) = q ta non %3D data Total profits n (1.e. the sum of profit for the two firms) are equal to: ggio max. ontrassegna O (a)n = nda %3D O (b) = 16 O (c)N = 4 O (d) = 9 Precedente SuccessivoConsider a market where the inverse demand function is P = 400 – 20Q, where Q is the aggregate output. Assume there are three firms which compete à la Bertrand. a)What is the equilibrium price and the corresponding aggregate output if all firms have a constant marginal cost equal to 40? b)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 100? c)What is the equilibrium price and the corresponding aggregate output if one firm has a constant marginal cost equal to 40 and the other firms have a constant marginal cost equal to 260?Two firms face the same inverse demand curve: P= 370– q, – 92 . Both firms have the same constant marginal cost: MC = 10. (a) %3D if both firms choose their output levels simultaneously, how much profits and consumer surplus will be earned in equilibrium? (b) Firm 1 is offered the following deal: by paying Z it can either (i) acquire a new technology that lowers its marginal cost to zero or (ii) have to opportunity to produce output before firm 2. Which option would it take and what is the maximum Z it would be willing to pay?A study of ethanol as a transportation fuel reveals that the competitive equilibrium is expected to be at a price of $4 per gallon and a consumption rate of 100 million gallons/day. For a production rate of 10 million gallons/day, the marginal cost is found to be $1 per gallon. Also, a a price of $10 per gallon the demand is 10 million gallons/day. Answer the following questions for this system. 1. Determine the equations for the demand and marginal cost lines. 2. Calculate the consumer and producer surplus for the market equilibrium. 3. It was discovered later that the above information ignored a government subsidy of 50 cents per gallon. How will the demand and marginal cost lines, and the competitive equilibrium, change if this subsidy is removed?Y6 Suppose that a market consists of 300 identical firms, all with the same cost curve: TC(4) = 0.1 + 150g?. The market demand is given by Qd(p) = 60 - p (a) What is the equilibrium price and quantity? (b) What quantity must each firm produce and sell at equilibrium? (c) Do firms make positive profits in the market equilibrium? (d) Calculate consumers' surplus, producers' surplus and total surplus.In this question you will work out a model of price competition (Bertrand competition) with differentiated products, i.e., when the two firms that compete produce slightly different products. Consider two price-setting firms, 1 and 2, each with marginal cost c, that produce goods, 1 and 2, that are imperfect substitutes. Some customers are loyal to a particular variety of the good so both firms can still have positive sales when they set different prices. Demand for firm 1's output, q1, as a function of the prices of both products, p1 and p2 , is given by q1 = 2 – 3p1 + 3p2. And the demand for firm 2's output, q2, is given by q2 = 6 – 2p2 + P1. a. How can we tell, by looking at the demand functions above, that in the preferences of consumers the two products are substitutes? Explain your answer.. b. Write this strategic situation as a simultaneous game between the two firms, specifying the set of players, the set of alternatives and the preferences of each firm. Write down the profit…4. Consider a market where every firm and every potential entrant has the iden- tical cost function C(q) = 3q³-6q² +6q. (a) Find the firm's inverse supply function. (b) Suppose the market demand function is given by QP (P) = 20-2P. Find the long-run equilibrium price, quantity, and the number of firms. (c) Suppose the demand function suddenly becomes perfectly inelastic at quan- tity Q = 7. Find the long-run equilibrium price, quantity and the number of firms. (d) Suppose the demand becomes perfectly inelastic at quantity Q = 7, and the government decides to collect a per unit tax t = 4 from the producers for every unit of the good they sell. Find the long-run equilibrium price, quantity and the number of firms.Question 3 The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has al cost of production of C₁= 15*Q₁ and firm 2 has a cost of production of C₂=20*Q₂. 1) Suppose firm 1 and firm 2 compute simultaneously in quantities. What are the Cournot quantities and prices? What are the profits of firm 1 and 2? 2) Suppose firm 1 and firm 2 compete simultaneously in prices. What are the Bertrand quantities and prices? What are the profits of firm 1 and 2? 3) Suppose that firm play a Stackelberg game. First firm 1 sets the quantity in t=1, then, knowing which quantity firm 1 has set, firm 2 chooses the quantity in t=2. What are the Stackelberg quantities and prices? What are the profits od firm 1 and 2? Compared to part a) which firm benefits and which firm loses?SEE MORE QUESTIONS