EXPLORING ECONOMICS
8th Edition
ISBN: 2818000015614
Author: Sexton
Publisher: SAGE
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Chapter 15, Problem 16P
To determine
To find:
The probability of everyone in the class getting an A in the course.
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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.
Suppose that there are two lemonade stands competing with one another via Bertrand (price) competition. There are 100
potential customers who walk by the two stands each day. Each of these customers will buy lemonade from whichever stand is
cheapest as long as the price is less than $1. If they charge the same price then the customer chooses randomly between the
two. The marginal cost of lemonade is the $0.25 for both stands. Fixed Costs are equal to $5 for each stand. What is the Nash
equilibrium price of lemonade?
a. $0.25
b. $1.00
c. $0.30
d. $0.35
This case study focuses on the pay-for-viewing TV (Pay TV in short) industry in Australia. Back in 2013, Foxtel had just finished acquiring Austar, its major competitor. Foxtel was enjoying near-total dominance in the market. There were other players such as Optus TV and iiNet, however, their market shares were dwarfed by that of Foxtel. IBISWorld reported that Foxtel occupied 92.6% of the market share in 2013. Then in March 2015, Netflix Australia was launched, opening the gate for an influx of other subscription video-on-demand (SVOD) services. These new services were internet-based, which differed from Foxtel’s model of cable TV. Nevertheless, they competed fiercely for subscribers. Fast forward to the present day (October 2021), Australian consumers now have a wealth of choices of the content offered by Foxtel, Netflix, Stan, Amazon Prime, Apple TV, Disney+, Optus Sport, and the recently launched Paramount+ (launched in August 2021).
Questions:
Draw a firm diagram to illustrate…
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