In: Economics

8. Suppose that demand for OVO themed lint rollers is given by

? = 120 – ?.

There are only two firms that produce this coveted product, they both have cost function

?? = 60 + q? 2 , where ? = 1,2 denotes the factory.

Total production of the lint rollers is equal to output from the two firms.

a. [10 marks] Suppose the two firms compete on quantities. Find the Nash equilibrium price and output of each firm. How much profit does each firm make?

b. [15 marks] Suppose that firm 1 gets this innovative product to market faster, so it makes its output decision before firm two. Find the Stackelberg equilibrium price and output of each firm. Are their profits different than in part(a)? If so, explain why.

Here the market price is “P=70.71” and the individual firms production are “q1 = 180/7 = 25.71” and “q2 = 165/7 = 23.57”. So, the profit of both firm are given by.

=> A1 = P*q1 – C1 = 70.71*25.71 – 60 – (25.71)^2 = 1,817.95 –
60 – 661 = **$1,096.95**.

=> A2 = P*q2 – C2 = 70.71*23.57 – 60 – (23.57)^2 = 1,666.63 –
60 – 555.55 = **$1,051.08**.

So, here we can see that under the stackelberg model the
1^{st} mover gets more profit than the follower. Here
because the leader know that the follower will produce using its
reaction faction only. So, the leader increases its produce to get
more profit and the follower choose its output according to its
reaction function. So, leader gets more profit and the follower
gets less profit compare to “part a”.

Suppose that the demand for artichokes (Qa) is given as: Qa =
120 - 4P
a. What is the point price elasticity of demand if the price of
artichokes is $10?
b. Suppose that the price of artichokes increases to $12. What
will happen to the number of artichokes sold and the total
expenditure by consumers on artichokes?
c. At what price if any is the demand for artichokes unit
elastic?

Suppose the demand for a product faces by a monopolist firm is
given by P= 120 - 2Q. If the marginal cost of producing the product
is $20, what is the profit maximization price the firm should
charge for the product? What are the firm's profits? Show the
work.

Suppose that the industry demand curve is given by P = 120 – 2Q.
The monopolist/incumbent faces MCM=ACM=40. a)
a) Solve for the profit-maximizing level of monopoly output,
price, and profits.
b) Suppose a potential entrant is considering entering, but the
monopolist has a cost advantage. The potential entrant faces costs
MCPE=ACPE=60. Assuming the monopolist/incumbent continues to
produce the profit-maximizing quantity from part a), solve for the
residual demand curve for the entrant.
c) Assume the potential entrant follows the...

Suppose that the market demand and supply for milk is given
by
Qd =120−6P
and
Qs = 12P − 60
a. Find the market equilibrium quantity, and the equilibrium price.
(5 points)
b. Determine the quantity demanded, the quantity supplied, and
the magnitude of the surplus (or shortage) if a price floor of $8
is imposed in this market. (5 points)
c. Determine the quantity demanded, the quantity supplied, and
the magnitude of the surplus (or shortage) if a price...

The demand and supply for a product is given by:
Qd: 120-4P and Qs: 2P+60
Suppose the government imposes a price ceiling of P=$8
calculate:
1) consumer surplus after the price ceiling
2) Producer surplus after the price ceiling
3) Deadweight Loss

Suppose a firm's inverse demand curve
is given by P = 120 - 0.5Q and its cost equation
isC = 420 + 60Q +
Q2.Find the firm's optimal Q, P, and π two ways…first, by using
the profit and marginal profit equations and then by setting MR =
MC. Also, provide an Excel-created graph of the demand
curve, MR curve, and MC curve (please do the excel
graphs).Suppose instead that the firm can sell any and all of its
output...

Suppose that the demand curve for wheat is
D
(
p
) = 120
−
10
p
, and the supply curve is
S
(
p
) = 10
p
. The government imposes a price floor of $8 per unit.
1. Draw a clearly marked graph to illustrate the demand, supply,
competitive equilibrium
point (without government intervention), and the price
floor.
2. Compute the equilibrium price and quantity after the price
floor and interpret the results.
3. Explain who...

Consider the market for wheat where demand is given by:
Qd=120-4p
and supply is given by: Qs=50 + 2p.
Now suppose that, due to a market failure (an artificial
shipping constraint), a maximum of 63.32 units of wheat can be
supplied by firms in the market.
The amount of the deadweight loss caused by the market failure
is $__________________.

A monopolist has a demand curve given by P = 120 -
Q and a total cost curve given by TC = 50
+2Q2. The associated marginal cost curve is MC
= 4Q. Suppose the monopolist also has access to a foreign
market in which he can sell whatever quantity he chooses at a
constant price of 88. How much will he sell in the foreign market?
What will his new quantity and price be in the original market?

A monopoly has an inverse demand function given by p = 120 - Q
and a constant marginal cost of 10. a) Graph the demand, marginal
revenue, and marginal cost curves. b) Calculate the deadweight loss
and indicate the area of the deadweight loss on the graph. c) If
this monopolist were to practice perfect price discrimination, what
would be the quantity produced? d) Calculate consumer surplus,
producer surplus, and deadweight loss for this monopolist under
perfect price discrimination.

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