8. Suppose there are two firms in the market. The market demand is Q=100-p and the marginal cost of production is constant at 40.

1. The demand for a monopoly seafood restaurant’s lunch is estimated to be: Q = 200 – P Assume TC = 10Q What price and quantity maximize profit assuming the firm charges the same price to all customers? Show all work. Draw the graph to illustrate. 2. Now suppose a second seafood restaurant opens across the street. There are now two firms. The products are differentiated so that Demand for firm 1’s product:  Q1 = 100 – p1 +(1/2)p2 Demand for firm 2’s product: Q2 = 100 – p2 + (1/2)p1 And TC1 = 10Q1; TC2 = 10Q2 Assuming both firms behave as Bertrand duopolists, solve for p1 and p2.  Show all work. Graph the reaction functions. 3) Suppose that in response to the presence of a superior competitor, firms polished its image and improved. As a result: Demand for firm 1’s product:  Q1 = 160 – p1 +(1/2)p2 Demand for firm 2’s product: Q2 = 160 – p2 + (1/2)p1               And TC1 = 20Q1; TC2 = 20Q2 Assuming both firms behave as Bertrand duopolists, solve for p1 and p2.  Show all work. Graph the…

The graph illustrates an industry in which many firms operating in perfect competition are taken over by one firm that operates as a single-price monopoly. Draw the following shapes: 1) the consumer surplus arising from monopoly. Label it CS. 2) the deadweight loss arising from monopoly. Label it DWL 3) the loss of consumer surplus that is a gain to the monopoly as producer surplus. Label it Monopoly's gain. Indicate whether each of the following statements is true or false. At the competitive equilibrium, marginal social benefit equals marginal social cost. At the competitive equilibrium, the sum of consumer surplus and producer surplus is maximized. At the long-run competitive equilibrium, firms produce at the lowest possible long-run average cost. 30- 25- 20 15- 10- 5- Price and cost (dollars per haircut) 0+ 0.0 MR 1.0 2.0 3.0 4.0 Quantity (thousands of haircuts) MSC 5.0

(a) There are two companies in the world that produce large passenger aircraft, Boeing, and Airbus. How would you characterize the market for large passenger aircraft, monopoly, perfectly competitive, monopolistically competitive or Oligopoly? Please explain. Large passenger aircraft are defined as aircraft than can carry more than 150 passengers.   (b) The market for telephone services has become more competitive over time with the advancement of technology in the industry. Technology in the aircraft manufacturing industry has also advanced significantly. Why hasn’t this improvement in technology led to an increase in competition (Boeing and Airbus have been the only manufacturers in this industry for many years)? Please explain.