) Model Management and Extreme Makeover In the model-management industry, firms supply human models for advertisements. Models are positioned at triangles and vary in skin color, which is measured on a line of unit length. Skin color can be modified with makeup, and the makeup costs are incurred by the firm. Each firm enters the market at an address on the color line, and each firm manages two models. Suppose the cost of an extreme makeover (the cost of going from one end of the color line to the other) is $90. Illustrate two equilibria with graph and determine of makeup cost in (i) a city with 4 model (2 firms) (ii) a city with 6 models (3 firms), including values for the makeup cost per model.

You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, raskels, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 12%, the quantity of raskels sold decreases by 27% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity…

PQ 18.02 (and 18.03) Two businesses in a market can decide to increase the amount of stores they operate. If neither business adds new stores they will each earn $10 million in profit; if both add new stores they will each earn $4 million in profit; and if one adds new stores while the other does not, the business adding new stores earns profit of $10 million and the other earns profit of $5 million. If these businesses are not colluding we would expect: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a both may or may not add new stores. b one business will add new stores and the other will not. c both will add new stores. d neither will add new stores.

Caroline and Frances are debating the pricing strategy of several airlines. Caroline argues, “When airlines restrict discounted tickets to people who book well in advance and stay over on a Saturday, it is not price discrimination, because the restrictions have nothing to do with individual buyers' willingness to pay.” However, Frances says, “The airlines' stay-over restrictions are a form of price discrimination, because they roughly split the market into two separate groups that are willing to pay two different amounts.” Economists generally agree with who?

Help with everything

Suppose there are only two gas stations in the remote town of Nome, Alaska and they are competitors. If one of them goes out of business, what will happen to the demand curve for the remaining gas station? In addition, what do you think will happen to prices? The graph below shows a demand for gasoline, with the price of gas and the sales of gas shown below on the graph. P P1 14 22 P2 32 D2 D1 Q1 Q2 Q3 The demand curve will pivot from D1 to D2 and prices will rise as demand becomes more inelastic. The demand will shift to the left, indicating lower demand when there are fewer stations. The demand curve will not change since everyone needs gas no matter what the price. The demand curve will pivot from D2 to D1 and prices will rise as demand becomes more inelastic. 00

Question Consider a market with an inverse demand Function p = 60 -4*Q. There are two firms, an incumbent and an entrant. There is a constant variable cost of 6 and a unit capacity cost of 6. In the first stage, the incumbent chooses capacity. In the second stage, the entrant decides whether or not to enter and all active firms choose quantities (where the entrant also has to simultaneously choose its capacity in the second stage, if it enters). a. For a capacity of 5 units, what is the best response function of the incumbent in the second period? b. What is the Cournot-Nash equilibrium of the second stage if the incumbent chose a capacity of 5 units in the first stage conditional on the entrant entering? c. For a capacity of an arbitrary k units, what is the best response function of the incumbent? d. What is the Cournot-Nash equilibrium of the second stage if the incumbent chose a capacity of k units in the first stage conditional on the entrant entering? e. Solve for the subgame…

There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for the services is ? = 2040 − 20?where quantity is measured in pave jobs per month and price, in dollars per job. The firms have an identical marginal cost of $200 per driveway. If the two firms collude, splitting the work and profits evenly, how many driveways will each firm pave, and at what price? How much profit will each firm make? Does Asphalt have an incentive to cheat by paving one more driveway each month? Show it numerically.

Here is a market with three firms: 1, 2, and 3. The demand curve is P=100-Q. There is no fixed cost but the marginal cost 10 for all firms. Firm 1 is a leader firm so that it decides the quantity Q1 first. Then two firms respectively decide their quantities Q2 and Q3 simultaneously. 1) At an equilibrium (SPE), Q1 is Q2=Q3= 2) At the equilibrium, (the market quantity) Q= and (the market price) P= 3) The profit of firm 1 is while the profit of firm 2 and 3 respectively is

Suppose a town only has two petrol stations, United and BP. Each could choose to charge a high price or low price, as shown in the matrix below. ВР BP charges a low price: BP has low profit; United BP charges a high price: BP has no profit; United has high profit United charges a United low price: has low profit ВР United charges a high price: has BP has average profit; United high profit; United has no has average profit profit (a) What is the dominant strategy for the above matrix (i.e., a Nash equilibrium)? Explain briefly (b) If the two petrol stations could collude, what would be the likely strategy? Explain briefly. (c) Briefly explain the principles of the 'kinked' demand curve by using an example such as pricing a product by the two supermarket giants.