ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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There are two ma jor producers of corncob pipes in the world, both located in Herman, Missouri. Suppose that the inverse demand function for comcob pipes is described by p = 120 4q where q is total industry output and suppose that marginal costs are zero. What
is the Cournot reaction function of firm 1 to the output, q2, of firm 2? (a) 120-4q22
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- usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…arrow_forwardThe profit maximizing output level for this firm isarrow_forward(Q7: see reference of Q4 for marginal value method to solving profit max problem) 7. a. Use calculus to find the profit maximizing level of (a) output, (b) price, and (c) profit for a two-product firm facing the following demand and cost functions (hint: marginal method): P₁ = 475-601 P2 = 450-802 TC(Q1Q2)=40+5Q1Q2 +30 +700 where quantities are expressed on a weekly basis. b. Check your answer with excel solver. (Q8: refer to Q3 and Q5 for constrained optimization problem, also see Q4 of PS 5-B) 8. Suppose the firm in problem 7 has a maximum joint capacity of 40 units per week (Q1+Q2<=40). a. Use Solver to find the profit maximizing level of output, price, and profit given this production constraint. b. Use the Lagrange multiplier (sensitivity report) to estimate the effect of expanding capacity by one more unit per week.arrow_forward
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