Question
In: Economics
The inverse market demand for clothing is P=48–2Q and the cost function is C=Q2. 1 Calculate...
The inverse market demand for clothing is P=48–2Q and the cost function is C=Q2.
1 Calculate the optimal profit of a monopolist.
Assume now that the monopolist can choose whether to continue operating in the market as a monopolist or set up two branches that operate in the market as Cournot duopolists (duopolist branching). Each branch will face the same quadratic cost function as the original monopolist.
2 Calculate the optimal profit under the duopoly branching. Will the firm prefer to produce with one or two branches? Explain whether this is counter intuitive.
3 Every unit of output Q generates a social cost of 10. The government chooses to pass on that cost to the firm as a lump sum to pay. In this situation, does the firm prefer to produce with one or with two branches operating as Cournot duopolists?
Solutions
Rahul Sunny answered 7 months agoRelated Solutions
The inverse demand function for diamonds is P = 1500 − 2Q. The market for diamonds...
The inverse demand function for diamonds is P = 1500 − 2Q. The
market for diamonds consists of two firms, Shiny and Dull. Shinys
cost function is c(q) = 300q + 5,000 and Dulls cost function is
c(q) = 300q + 10,000/4. Which of the following statements is true?
ANS is E) but please show the working out
(a) Cournot equilibrium total output is 400. Stackelberg eq.
total output is 300.
(b) Cournot equilibrium total output is 200. Stackelberg eq....
The inverse demand function for video games is p = 240 ? 2q and the inverse...
The inverse demand function for video games is p = 240 ? 2q and
the inverse supply function is p = 3 + q. The government imposes a
$6 tax on each video game purchased. a) Find CS and PS before
tax
b. Find CS and PS after tax
c. Does the CS fall by more than the PS or
not?
(SHOW THE PROOF USING VALUES
OF ELASTICITES OF DEMAND AND SUPPLY)
The (inverse) demand for vitamin D dietary supplement is p = 85−2q and the cost function...
The (inverse) demand for vitamin D dietary supplement is p =
85−2q and the cost function for any firm producing vitamin D is TC =
(5q+F),where F is fixed cost.
(a) What is a marginal cost? How much of vitamin D would a
monopolist produce? What price would it charge? How much profit
would it earn?
(b) For which of the following values of F is a market for
vitamin D a natural monopoly? F= $100, F= $200, F= $300,...
3. Assume that the inverse demand function for a good is P = 40 – 2Q....
3. Assume that the inverse demand function for a good is P = 40
– 2Q. A monopolist retailer has exclusive rights to sell this good.
A monopolist manufacturer sells the good to the retailer at price
R. The retailer has an additional marginal cost equal to $2 per
unit. The manufacturer’s marginal cost is $4 per unit.
a) Assume that the two firms remain independent. Determine the
value of R charged by the manufacturer.
b) Now assume that the...
The market demand function for a monopolist is p=58-2Q and its cost is C(Q)=10Q. a) Determine...
The market demand function for a monopolist is p=58-2Q
and its cost is C(Q)=10Q.
a) Determine the monopolist’s price and quantity in
equilibrium.
b) Suppose now that a competition authority forces
the monopolist to employ marginal cost pricing. Determine the price
and the quantity with this new pricing scheme.
c) Compute and compare the consumer surplus,
the firm’s profit, and the social welfare under unrestricted
monopoly and under marginal cost pricing. What is the deadweight
loss due to unrestricted monopoly pricing?
Consider a market where the inverse demand function is p =100 – Q, Q = q1+q2....
Consider a market where the inverse demand function is
p =100 – Q, Q = q1+q2. Both firms in the
market have a constant marginal cost of $10 and no fixed costs.
Suppose these two firms are engaged in Cournot competition. Now
answer the following questions:
a) Define best response
function. Find the best response function for each firm.
b) Find Cournot-Nash
equilibrium quantities and price.
c) Compare Cournot solution
with monopoly and perfect competitive solutions.
Assume two firms 1 and 2. The inverse market demand function is given by: P=30-(q1+q2)...
Assume two firms 1 and 2. The inverse market demand function is
given by:
P=30-(q1+q2)
Each firm produces with marginal costs of
MC = 6
Fixed costs are zero.
The next questions refer to the Cournot duopoly.
Question 1 (1 point)
What is Firm 1's total revenue function?
Question 1 options:
TR1=30q1 -q1
-q22
TR1=30-2q1-q2
TR1=30q1
-q12-q2
None of the above.
Question 2 (1 point)
What is Firm 1's marginal revenue function?
Question 2 options:
MR1=30-2q1 -q2
MR1=30-q1-2q2
MR1=30-2q1-2q2...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2
(a) (7 points) Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit.
(b) (5 points) Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total
cost function is C = 100 + 2q2.
1. Suppose there is only one firm in the market. Find the market
price, quantity, and the firm’s profit.
2.Show the equilibrium on a diagram, depicting the demand
function D (with the vertical and horizontal intercepts), the
marginal revenue function MR, and the marginal cost function MC. On
the same diagram, mark the optimal price P, the quantity...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total
cost function is C = 100 + 2q 2 .
(d) (2 points) Verify that the monopoly price and quantity
satisfy the monopolist’s rule of thumb for pricing.
(e) (3 points) What is the monopolist’s factor markup of price
over marginal cost?
(f) (4 points) How does the monopolist’s factor markup of price
over marginal cost compare to that of a perfectly competitive
firm?
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