Extend the Cournot model discu in class to chooses to produce qi at cost cq; where c> 0. The set up costs are denoted by K₁< K₂ respectively for firm 1 and 2. The selling price is P(Q) = (a - bQ)+ where Q = 91 + 92. What are the optimal production quantities for each firm? (Hint: A firm has the option of not producing at all with a cost of zero).
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- TC(Q)=5+2* Q² Provide a table of the marginal costs and average total costs for Q = 0, 1, 2, ..., 10. At what quantity are economies of scale exhausted? If the good/service being sold has a constant price of $20, at what quantity are profits maximized? (Note: If there is not a quantity integer that corresponds to the profit-max condition, firms would halt production at the last unit producing profit.)Firm 1 is the leader and Firm 2 the follower in the model of price leadership. Thus, Firms 1 and 2 are the only two producers of a certain good; Firm 1 chooses the price p it will commit to maintain in the market; after having observed Firm 1's decision p, Firm 2 chooses the quantity yz it will produce. Here, the firms cost functions are as follows: c(y;)=3y, +y,?/2 and c2(Y2)= y2?/4. The inverse demand curve is p(Y)=70-Y. What is true about the quantity Firm 2 will produce at the equilibrium of this model? O a. It is between 40 and 42. O b. None of the other answers. It is between 44 and 45. O d. It is between 38 and 39. Oe. It is between 43 and 43.5.Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions: Bangladesh Q1 = 12 – P1Sri Lanka Q2 = 8 – P2 Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is C = 5 + 2 (Q1+ Q2) Required. Determine the company’s total profit function. Also, (i) What are the profit maximizing levels of price and output for the two markets? (ii) Calculate the marginal revenues in each market.? 2. Now consider two cases: (i) Company is effectively able to price discriminate in the two markets. What will be the total profits? (ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit…
- Suppose the Boston to Philadelphia airline route is serviced by three airlines – US Airways (Firm A) and JetBlue (Firm B) and Continental (Firm C). The demand for airline travel between these two cities is Q = 150 – p. The cost function is C(Q) = 30Q. The cost function is the same for all three airlines. Assume that the three airlines are making investments in airline capacity. In other words, they are simultaneously choosing quantity. (Cournot Competition) Derive US Airways’ residual demand function given JetBlue’s output, qB, and Continental’s output, qC. What is the Marginal Revenue for US Airways? Derive US Airways reaction function Derive the market equilibrium quantity, Q*, price, p*, and Profit.A group of management students are creating a business plan for their proposed shoe brand SoleSearching. The total production cost of x pairs of shoes is expected to be given by C(x) = x² +500x + 8000 pesos. The group intends to sell at p(x) = 1000 - x pesos per pair. 1 1. What will be the marginal profit when 100 pairs are sold? 2. At what production level will the average cost per pair be at a minimum? (Perform SDT)Output is homogenous and the demand curve is P = 448 - Q. There are two firms with identical %3D costs given by C = q2 i where qi is the production of firm i. The marginal cost of firm i is Mci(qi) = 2qi . (a) Find the Cournot equilibrium firm outputs. (b)
- Two dairy farmers produce milk for a local town with local milk demand given by Q = 100 - 1/3P (P denotes price measured in Rands, Q denotes the quantity measured in liters). Both farmers have the same cost function given by TC = 150 + 2Q (where Q denotes output). (a) Determine the reaction function of each farmer.Adriana Caselotti's company developed a new product ten years ago. Ever since, Adriana has managed production of the product with minimal worker turnover. Over that time, the average cost to the firm has decreased by 30%. This is due to improvements in production methods leading to greater efficiency. Rival firms have not achieved such reduced costs. The cost advantage enjoyed by Adriana's company is called achieved through marginal cost reduction; long-term production a key input price reduction; unique cost advantages a unique cost advantage; learning by doing mass production; key input price reductionThe joint cost, in dollars, for two products is given by C(x, y) = xVy? + 11. (Round your answers to the nearest integer.) (a) Find the marginal cost (in dollars) with respect to x if 30 units of x and 5 units of y are produced. dollars per unit of x (b) Find the marginal cost (in dollars) with respect to y if 30 units of x and 5 units of y are produced. dollars per unit of y
- Please no written by hand solutions 2. Mr Gieves and Mr Hawkes produce items of clothing. The market demand for clothes is y = 13-p with y = y1+y2 and p denoting the market price of clothes. Mr Gieves and Mr Hawkes compete by simultaneously choosing the quantity of clothes to send to the market, and their cost functions are C1 (y1) = y₁ and C₂(y2) = y2 respectively. (a) Set up the profit functions, and derive the reaction functions. (b) Find the Cournot equilibrium of the market. Indicate what the market price, individual outputs and profits are.Despondent over the Red Sox's terrible season, Prof. Gruber decides to quit his day job and start a bicycle manufacturing firm in Kendall Square. As he starts looking into the bicycle manufacturing industry, he realizes it has some interesting features. First, he realizes that it operates as a competitive industry. Second, he finds that there are two technologies used by firms in the industry. Technology 1 uses solar power, and has a cost function C1(q)=q+4Q2+32 for q>0. Technology 2 uses electricity from the grid and is more efficient, with a cost function C2(q)=q+2Q2+32 for q>0. Assume that we are in the long run, so firms using both technologies can shut and leave the market at 0 cost, so that C(0)=0 for both technologies. Now, suppose that the government of Massachusetts offers solar subsidies to 10 bicycle manufacturers. These subsidies are for $80 and the manufacturers receive these subsidies as long as they construct a bicycle manufacturing plant using the newly-invented…Suppose market inverse demand function is p(y)=100-Yt where Yt is total production in the market. Assume that there are two firms with following marginal cost MC(firm 1)=Y1 MC(firm 2)=2*Y2+10 Assume that Yt=Y1+Y2 Set up profit function for both firms. What is the best response function of each firm by taking into account action of other firm? What output level is going to be produced by each firm in equilibrium? Assume that Firm 1 is leader in the market and going to act first. What will be the best response and output level of firm 2. What is difference between previous and new situation? Why? What is difference between Bertrand and previous competition? How would you like to find equilibrium price?